Switzerland-headed VARO Energy Marketing AG (VARO) has announced that it has reached an agreement to acquire Swedish oil refiner and fuel retailer Preem Holding AB and Preem AB (Preem) through the purchase of 100 percent of the share capital of the parent company, Corral Petroleum Holdings AB (CPH), in an all-cash transaction.
Subject to customary closing conditions and the receipt of regulatory approvals, the transaction, the value of which has not been disclosed, is expected to be completed in the second half of 2025.
The agreement follows a competitive mergers and acquisitions (M&A) process after CPH announced a strategic review of its assets in late 2023. VARO has been engaged in this process for over 15 months, entering exclusivity in August 2024.
As part of this process and per its rights under existing security arrangements, Deutsche Bank (Suisse) SA, as pledgee of the CPH shares, executed the sale agreement on behalf of CPH’s parent company, Moroncha Holdings Co. Ltd.
Transportation fuel major
Preem is one of the largest energy companies in Scandinavia. The company plays a critical role in the region’s energy security, providing over 40 percent of Sweden’s and around a quarter of Scandinavia’s energy needs for transportation. It serves customers in 17 countries across Europe.
An early mover in renewable fuel production, Preem has invested nearly US$1 billion since 2010 in the production of renewable fuels and initiatives aimed at reducing the carbon intensity throughout the value chain.
As a result of these investments, Preem’s current renewable fuel production of 0.3 million tonnes per annum (mtpa) will rise to 1.3 mtpa, with the Synsat diesel plant upgrade enabling up to 40 percent co-processing of renewable feedstocks.
The company also has a material pipeline of other renewable fuel projects.
Two production facilities
Preem owns two major oil refineries and fuel manufacturing facilities in Sweden, Preemraff Lysekil and Preemraff Gothenburg, respectively.
The two facilities have a combined capacity of 352,000 barrels per day (bpd), which equates to 80 percent of Sweden’s refining capacity, and the ability to co-process renewable feedstock.
Primarily located in Scandinavia, Preem’s assets are highly complementary to VARO’s existing operations across northwest Europe with limited overlap.
The acquisition of Preem is transformational for VARO. On completion, we will become Europe’s second largest renewable fuel producer with an extensive distribution and storage network across major European markets with a conventional fuel production capacity of 530,000 barrels per day. Combined, we will serve over 50,000 business customers across 33 countries, with our future growth underpinned by a robust portfolio of mature renewable fuel projects, said Dev Sanyal, CEO of VARO.
Founded in 2012, VARO currently operates in 26 countries and is owned by Carlyle (66.66 percent) and Vitol (33.33 percent).
The company sources, manufactures, blends, trades, and distributes both fossil fuels and sustainable fuels, including advanced biofuels, biomethane aka renewable natural gas (RNG), and e-mobility solutions.
This acquisition provides material value creation opportunities through disciplined investment in future growth projects while enhancing VARO’s ability to deliver the reliable and secure energy that Europe needs. The combined entity will be well positioned to continue to play an important role in meeting Europe’s growing demand for sustainable energy for the mobility and industrial sectors, said Marcel van Poecke, Chairman of VARO and Chairman of Energy at Carlyle.
Creating a leading mobility energy provider
VARO is committed to reducing the carbon intensity of its products and services while decarbonizing its operations to meet ambitious sustainability targets.
The combined group will have a large geographic footprint across key European markets, with global feedstock sourcing capabilities and an expanded customer base.
Benefiting from Preem’s manufacturing facilities and VARO’s Cressier and Bayernoil assets, VARO’s fuel manufacturing capacity will increase to 530,000 bpd.
It will serve over 50,000 business customers in Europe and account for almost 10 percent of all road and marine fuels sold on the continent, with Sweden becoming its largest manufacturing base.
The company will operate one of Europe’s largest supply networks, with access to over 120 terminals, and will be the largest co-processor of renewable feedstocks in Europe.
On completion, the combined group will rank in the top five largest producers of Hydrotreated Vegetable Oil (HVO) and Sustainable Aviation Fuel (SAF) globally.
It will be Europe’s second largest renewable fuel producer and the top producer in Sweden.
We are very excited by this transaction. The company will be Europe’s second-largest producer of biofuels – which are key to decarbonizing transport in Europe. It will benefit from access to Vitol’s network and global expertise. We greatly look forward to expanding this ongoing and successful partnership and working with the combined entity to meet customer requirements and supply evolving markets, said Russell Hardy, Supervisory Board member of VARO and CEO at Vitol.
Strong position in renewable fuels
Biofuel demand in the EU transport sector is expected to increase by 50-80 percent by 2030 as Member States accelerate decarbonization efforts.
With more than a decade of experience developing renewable fuel assets, Preem brings valuable expertise in applying proven technology at scale.
When combined with cash flow growth, increased liquidity, and a strong balance sheet, the combined group will have an enhanced capacity to invest in and develop its renewable fuel asset portfolio.
In addition, material value upsides from combining the two businesses have been identified.
These include leveraging the combined companies’ physical assets with VARO’s extensive value chain optimization, risk, and exposure management capabilities to deliver higher margins, improved crude mix, and renewable feedstock optimization.
Post completion the intention is to focus on three investment priorities.
- First, investing in improved security of supply and asset resilience across manufacturing, distribution, and storage;
- Second, decarbonizing and increasing the efficiency of conventional manufacturing assets;
- Third, investing in the attractive portfolio of biofuel projects of both companies, with a customer-centric approach designed to keep pace with evolving demand for sustainable energy.
Delivering on VARO’s 2022 strategy
In 2022, VARO set out an ambitious set of strategic targets to triple EBITDA by 2026, with 50 percent coming from sustainable energies.
Over the last three years, VARO has made good progress towards achieving these goals, notably the acquisition and expansion of the biogas facility in Coevorden, the Netherlands, and progressing the development of an SAF facility in Rotterdam, the Netherlands.
The combined company will be well positioned to achieve these financial targets.
Investing for the long-term
Both VARO and Preem share a strong commitment to ambitious targets for decarbonizing their operations and reducing the carbon intensity of the solutions they deliver to customers.
Following the completion of the transaction, VARO will leverage the decarbonization expertise and proven track record of both organizations to support national and European energy transition agendas and drive progress toward a low-carbon future.
Collectively, the companies have achieved a 16 percent reduction in carbon dioxide (CO2) emissions from their own operations and abated 5.5 million tonnes per year of CO2 for their customers since tracking began.
With strong medium-term cash flow generation and a long-term holder of assets, VARO says that it “will ensure responsible stewardship of Preem. We will continue to be a partner in Sweden and the wider region’s security and energy transition priorities.”
