Infratil and the New Zealand Superannuation Fund stand to at least triple their money on Z Energy in next month's initial public offering, having used their financial strength to buy the former Shell assets when markets were still reeling from the global financial crisis.
The Wellington-based investment funds contributed about $210 million each toward the $696.5 million purchase price, with the balance funded by debt that has since been repaid or transferred to Z Energy's books.
They plan to list up to 50 percent to 60 percent of the company next month on the NZX and ASX.
Based on the pricing range in the offer document of $3.25 to $3.75 per share, Z Energy will have a market value of $1.3 billion to $1.5 billion.
The net effect is that each will have realised between $650 million and $750 million from Z in terms of funds received from the IPO and the value of their residual shareholding.
Infratil and NZ Super announced their agreement to buy Shell New Zealand's distribution and retail businesses and 17.1% interest in New Zealand Refining, owner of the Marsden Pt oil refinery, in March 2010, having spent almost a year putting the deal together.
That means the negotiations had kicked off in early 2009, when the fall-out from the financial crisis had pushed assets values to their lowest levels in at least five years. The NZX 50 Index slumped to its lowest level since early 2004 in March 2009.
In its 2010 annual report, Infratil said the counter-cyclical Shell transaction was one of the "positives from the turmoil" because it allowed the company to "invest in a market-leading business at a price which reflected a low level of competition amongst prospective buyers".
"It has been a fantastic investment," Mark Flesher, corporate development executive at Infratil manager Morrison & Co, told BusinessDesk.
Z Energy will not see any of the funds raised in the IPO, which is simply designed to allow Infratil and the Super Fund to realise some of their investment.
Super Fund spokesman Stewart Brooks says Z Energy "has responded well" to capital investment and re-branding over the past three years and as a result "now represents a significantly larger proportion of the Fund than it did when we purchased it in 2010". Selling down its holding would help to diversify the fund's portfolio.
Mr Flesher says Z Energy "has a very strong balance sheet that still allows them to grow" and there are assets within its portfolio that could be recycled in future, such as the stake in NZ Refining.
Shares of Infratil rose 0.4 percent to $2.485 on the NZX today and have gained 8.8 percent this year. The stock is rated a 'buy' based on five analysts surveyed by Reuters.