Petrol station and property owner Viva Energy REIT commenced a cornerstone process for its initial public offering over the weekend, fund manager sources told Street Talk on Sunday.

Prospective investors were asked to submit offers between $2.10 and $2.20 a share on Friday. This means the raise will be circa $900 million.

Bank of America Merrill Lynch and Deutsche Bank are running the deal. The brokers are locking in the cornerstone investors ahead of a wider institutional marketing and management roadshow.

The cornerstoning process is expected to wrap up next week with the broader institutional bookbuild to take place in the last week of July.

The company is expected to list in early August.

Deutsche and BAML kicked off Viva Energy REIT’s initial public offering campaign last Monday, as revealed by this column.

In pre-IPO marketing research sent to fund managers, Deutsche analysts Emily Smith and Stuart McLachlan put a $1.5 billion to $1.7 billion valuation on the company. That reflected a yield of 5.8 to 5.2  per cent.

The valuation also implied 1.12-times to 1.25-times the value of Viva Energy REIT’s net tangible assets.

Analysts at BoA-ML ascribed a wider valuation range of $1.3 billion to $1.7 billion, equating to an implied price to net tangible assets of 0.96 times to 1.25 times

Deutsche analysts said the REIT would initially be geared at 35 per cent, and current owner Viva would seek to retain about a 40 per cent stake in the new company.

Viva Energy REIT will own an initial portfolio of 425 freehold service station sites, which are leased in full to Viva Energy. All sites operate under an alliance agreement between Viva Energy and Coles Express.

Extracted in full from the Australian Financial Review.