After more than a decade leading consolidation in US oil refining, O’Malley and his long-time cadre of close associates, including CFO Karyn Ovelmen, turned to Europe, where they’d spotted an industry ripe for consolidation. After setting up Argus Atlantic Energy to look for acquisition targets, the O’Malley team was quickly drafted by a private equity consortium to run Petroplus – a relatively small, struggling refining and trading outfit. They have since turned it into Europe’s largest “pure-play” oil refiner and marketer through three big plant acquisitions totaling nearly
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2 billion. Already, Petroplus is the clear leader among independents in consolidating one of Europe’s largest manufacturing industries. The big question for Petroplus now – also one of its biggest risks – is whether it can maintain the momentum. It’s a company operating under the weight of very high expectations in an overheated M&A market. Having expanded the balance sheet by more than two-and-a-half times (to about
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3 billion capital employed) and Ebitda nine fold to
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480m in a year, investors and analysts expect Petroplus to pick up at least one plant currently for sale (see “Everything must go!” on page 21) within the next 12 months, and for as good a price as it bought the fir t three plants, in order to add another 25% or more to Ebitda. And they’ll want more after that. As Andrew Bowman, Morgan Stanley’s European refininganalyst puts it: “Petroplus’ value-creation strategy is highly reliant on replicating its early success in securing European refining capacity at an attractive price. However, with other European refiners – many cash-rich but lacking in opportunity, such as Saras of Italy – now looking to acquisitions to fuel growth, prices could be pushed up.” indeed,
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6 billion Saras, controlled by Massimo Moratti best known in his home country as the owner of top soccer club Inter Milan – has acknowledged that it is looking to buy refineries. After annual results in February, Saras’ CFO, Corrado Costanzo, said, “We want to grow, we have firepower to grow [and] we are focused on refining. But there may be some opportunities in retail, power.” As Costanzo ‘s caveat indicates, most of Petroplus’ closest competitors, while they may want to pursue refinery consolidation, are wary and busy diversifying. Many of these companies are still family controlled, or recently privatized by governments, and may not relish entering into a battle for assets with aggressive new competitors
Karyn Ovelmen – Turnaround CFO
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