(Bloomberg) — Vitol Group agreed to buy a controlling stake in refiner Saras SpA from the family of Italian billionaire Massimo Moratti, in a deal which will increase the commodities trading giant’s exposure to the lucrative Mediterranean market.
The Moratti family reached an agreement to sell about 35% of Saras at €1.75/share, according to a statement from the family. The deal values Saras at about €1.7 billion ($1.9 billion.)
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Privately-owned Vitol has been banking huge profits over the past few years as first the Covid-19 pandemic and then Russia’s invasion of Ukraine unleashed massive volatility across oil, gas and power markets. With those shocks now on the wane, Vitol and other cash-rich traders have gone on a buying spree, looking to lock in bigger margins longer term.
Vitol has snapped up stakes in refineries and retail fuel networks, as well as invested in US upstream oil and renewables. The Saras deal will add a stake in a refinery that feeds into the Mediterranean business and beyond. When completed, Vitol will have investments in over 800,000 barrels per day of refining capacity.
Situated on the southern coast of Sardinia, Saras’s Sarroch refinery is also set up to process a wide variety of crude oils, creating opportunities for a global trader such as Vitol to capitalize on the most profitable supply options available.
“Saras’s business is highly complementary to Vitol’s core operations,” Vitol CEO Russel Hardy said, noting that the refinery was “a key European energy asset.”
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Saras shares fell at the Milan opening Monday, dropping as much as 7.3% and trading below Vitol’s offer price. Shares have since pared some of the losses and traded at €1.717 at 1:26 p.m..
Angelo Moratti, one of Massimo Moratti’s nephews, may also sell his remaining 5% which is linked to a collar derivate contract. Vitol will then launch a takeover bid for the remaining Saras shares. Bloomberg News first reported Vitol’s talks with Moratti Feb. 7.
Read More: Italy’s Moratti Family Approached About Sale of Saras Stake
The Moratti family has a 40% holding in Saras, giving them control of the firm. Massimo Moratti, the chairman and chief executive and a former owner of Inter Milan football club, holds 20%. His nephews Gabriele Moratti and Angelo Moratti each own 10% via holding companies.
“62 years after my father founded it, together with my nephews, I believe that the best assurance for the future success of the Sarroch refinery is the aggregation with a leading player in the global energy sector, such as Vitol,” Massimo Moratti said in the statement.
Founded in the 1960s by the family, Saras runs the 300,000 barrels-a-day refinery. Commodities trader Trafigura Group has about 9.6% of the refiner after selling about 4% last month.
The refinery is considered relatively advanced, meaning it is able to tweak the crudes it processes and the fuels it makes. It is the largest single-site plant in southern Europe although Italy’s ISAB facility, which is split into northern and southern sections, is bigger when combined.
The Moratti statement said completion of the transaction is subject to regulatory approvals including the Italian government’s so-called Golden Power procedure, which allows it to block or impose strong conditions on deals involving strategic assets.
“This transaction presents an opportunity for Vitol to invest in a high-quality asset, well placed to serve both Italy’s and Europe’s current and future energy needs,” the company said in the statement.
The Moratti family is advised by BofA Securities and Four Partners Advisory as financial advisers and Linklaters as legal adviser. Vitol is advised by J.P. Morgan as sole financial adviser and by Chiomenti and Weil, Gotshal & Manges as legal adviser.
(Adds context on Saras’s operations.)