Oil, Sanctions & SuperTankers: The Deals Driving Global Energy

0:00This episode is brought to you by Indeed. You're ready to level up your business, but the pressure to find the right person to make that happen is intense. Indeed Sponsored Jobs can help carry the load. It boosts your job post to help it reach quality talent fast. Cut through the chaos with Indeed Sponsored Jobs. Get a$75 sponsored job credit at indeed.com slash podcast. Terms and conditions apply. Hiring now? Then this is a job for Indeed Sponsored Jobs. Hello and welcome back to the Market Maker podcast and today we're closing our laptops taking a short detox from the flood of AI news and we're going to focus on something that everyone will likely understand a little more than some of our recent episodes on hugging faces and large language models because we're going to talk about the subject matter of energy and we're going to take a tour through Nigeria, Russia, Singapore, Ireland to better understand how the macroeconomic and geopolitical climate is affecting corporate strategy and deal-making.

1:01We're going to cover a flagship IPO in Nigeria, Carlisle's thwarted attempt at acquiring Russian supermajor Lockoil's international assets, Singapore's based oil trader Trafigura's foray into spot shipping, and yes, we will explain what spot shipping is, and KKR's eventual take private of Irish DCC energy. But before we begin, as always joined by my co-host Stephen, how are you? Great glance, yeah, thank you. It's going to be a fun episode this. It's one of those things that whenever I tell my parents, I do a podcast and they try, being good parents, they try to listen and then they just go, look Stephen, I'm sure you were good but I didn't understand a word you were saying, which I don't think is particularly good feedback.

1:51So I'm assuming it's not me, it's the AI content that they're getting confused about. So maybe let's go back and talk about basically what is, you know, we talk about data being the new oil. Well, it's not the oil gone anywhere. Oil is the existing oil. So yeah, looking forward to this episode and getting stuff into some countries that, again, we don't talk about a lot and I'm sure don't appear top of mind when it comes to investment banking. Yeah. And I love that intersection of geopolitics meets business strategy and finance. So some of these countries are going to be interesting, I'm sure, to unpack.

2:34So maybe we can start with this Nigerian one then. yeah so this is a 1.6 billion dollar ipo of dangot petroleum now dangot petroleum sounds like a big company and it is a big company obviously with a 1.6 billion dollar ipo it's basically a single refinery so dangot petroleum refinery it's going to list in on the new york stock exchange hopefully by the end of 2029. But in order to do that, it first is going to list in Nigeria. Now, what's super interesting about this IPO is it is an IPO, according to the FT, it is an IPO for the people. So Dangot Petroleum is owned and run by the wealthiest person in Nigeria.

3:30Eliko Dangote is actually Africa's richest man and what he's saying is look there's a problem there's a structural problem in Africa that we tend to live as Africans hand to mouth and we don't invest and we don't build up that generational wealth and we don't protect ourselves for a rainy day or retirement so this IPO is giving the average Lagosian Nigerian on the street the opportunity to participate minimum 10 shares, 40 cents each as part of this IPO for the people. So it's effectively, it's an energy story. This is Dangote Petroleum Refinery based in Lagos, but it's also a kind of democratized IPO story, which I thought was quite interesting.

4:23so let's say you said there's one refinery which immediately gets my interest in terms of okay so they got one what is this just uh they need they need capital in order to build out from the one or you need to maintain and optimize the one like what's the strategy there in terms of the the usage of the money that they're going to raise here yeah so they've only got one refinery but that's not to suggest that it's a small operation or a small company. I was looking through where the largest oil refineries are in the world. And just as a reminder, oil refineries are absolutely essential to getting from the stuff that we take out of the ground in places around the world, many of which are in the Middle East, to the petrol pumps, to the jet fuels, to the plastics and synthetic chemicals that we need for all of the things that power our daily lives.

5:21So refineries are just as important, if not more important, than the process of getting the stuff out of the ground. So I was looking at the top 10 largest oil refineries, and I was going to give you a quiz, but I thought that might be a little bit difficult. The largest oil refinery by capacity, according to my notes, is the Jamnaja refinery in India, capable of processing 1.2 million barrels of oil per day. And you go down the list, there's a Venezuelan one close to the output. There's three South Korean refineries in the top six, which is quite interesting from a cluster concentration perspective.

6:03There's one in the UAE, but Dangote is number seven, currently producing around 700 or refining around 700 ,000 barrels of oil a day. And I also put in my notes a little map of where all of the refineries, all of the major refineries in the world are. And you can see, as you would expect, huge clusters in Europe and North America and East Asia as well with those three big South Korean ones. But there's barely anything in Africa, right? There's just a few small refineries. And bearing in mind how much oil Nigeria produces, this is a real problem. This is kind of an energy security problem. So the use of proceeds from this $1.6 billion raise is going to be to retrofit this existing seventh largest in the world refinery and double its capacity.

7:02So if it doubles its capacity to 1.4 billion barrels of oil a day, it becomes, until there's a bigger one, the largest oil refinery in the world. And that scale, according to the strategists that have been working on this, that scale is teeing this company up for a New York Stock Exchange listing later in the decade. So it's kind of a two-stage process. Interesting to think of the investment bankers advising on how to get where the richest person in Africa wants to get with this company. I was going to ask then when you're doing a valuation process or model how do you do that with a country like Africa what like aside from the fundamentals of looking at the the numbers in themselves what are other considerations that you need to take into account for that specific region you mentioned other places like South Korea for example but I'd imagine the process of that the makeup of regulation, the way businesses are conducted in South Korea is probably a world away from what it's like in Africa.

8:18So how do you approach that as a complement to your modeling that you're doing in order to ascertain a fair value? Yeah, it's so interesting. And my gosh, the ability to get the refinery up and running, the entrepreneurship of Eliko Dangote to get to this stage in a country that is unfortunately very well known for extreme corruption, relative graft, and the kind of sucking of the natural resources into the pockets of the very wealthy people in Nigeria. To get a functioning business that works really well, that isn't in-hop to graft and to payoffs and things like that, is quite remarkable. It's an amazing achievement.

9:09And it's an achievement that means that they can go out and IPO, firstly here, well, firstly in Nigeria and then in New York. But in terms of valuation, I think it's probably worth thinking about what we would, going a little bit technical maybe, and thinking about the discount rate that we would apply to all of the future cash flows coming out of this business. We value businesses in parts on their future cash flows, right? Because that's what we want to have a claim to as part owners, shareholders of a business. So if I'm looking at valuing this business, I want to look at its future cash flows and then discount it based on what I could be doing with the money in the meantime, instead of investing in this company, but also on the risk associated with investing in that company, in buying shares in that company.

10:05And that risk is a very, very complex thing to figure out, right? What is the risk of owning a share of a company? The safest companies have very low risks. They have very low discount rates, their future cash flows are more valuable to me than a riskier company. So I would factor in Nigerian political, economic, geopolitical risk into my discount rate and apply a higher discount rate than maybe one of the South Korean refineries when it comes to valuing this asset. Okay. I was just thinking about the process of who's conducting what you've just described. So just top level then, would there be an investment banking team who specialize in energy, they specialize in a geography?

10:57So would you expect that on the ticket as an advisor to this deal would commonly be the same team because they know the African space really well? Would that be true? Yeah, I think in most cases, you're absolutely right. You would get bulge bracket or large regional banks that have got a specialism in energy, in oil and gas in this instance, and more specifically in a particular region. But what is very interesting about this IPO, and again, let's think about an IPO for the people, as the FT likes to say, this IPO, we don't see the JP Morgan's and the Goldman Sachs's on the ticket in terms of IPO underwrite.

11:43And in terms of advice, we see Africa-based investment banks, United Capital, FSDH Capital, and First Cap. They are all acting as underwriters and advisors. So this is super interesting, right? It is one of these, again, economists will know the concept of a trapped dollar? And how long does it take for a dollar to leave an economy? And that's leaving the economy through buying exports or through putting it in foreign investments or whatever it might be. So this IPO is kind of like a trapped IPO. It's trying to boost Nigeria as an economy from the person on the street through to the investment banks, through to the scale of this refinery, leading to more energy security.

12:37So this is quite an interesting story. I quite like it. You mentioned that energy security. So just given what's happened at the moment and ongoing in the Persian Gulf, Russia, Ukraine, the general geopolitical context globally, is there a degree of people often talk about the potential of Africa, but in order to fulfill that potential you need to have foreign investment so the security of energy is probably one part of several steps to success almost to fill that potential so is there a sort of implication here for more of a macro geopolitical context specifically for what what often is termed as like a a really meaningful potential high potential country for the long-term future in Nigeria.

13:31Yeah, I think you're absolutely right. This has been such a hearth of a resource-rich country and a resource-rich continent that there lies so much valuable stuff under the ground. And historically, until this refinery was made operational, historically, Nigeria has taken loads and loads of oil out of the ground. Most of the proceeds of which have ended up in the corrupt ecosystem, unfortunately, and haven't trickled down appropriately. But they've been taken out of the ground and then they've been shipped off somewhere else to be refined. And then they've had to buy back the refined products for petrol and diesel and jet fuel and things like that.

14:19So although they're making money off the extraction, getting it out of the ground, they're getting totally screwed over by having to accept the foreign markup and quite frankly, the foreign exchange risk when it comes to slightly volatile currencies. And they've been basically losing, even though they produce the oil that is getting refined, that they're ending up buying back. So again, from that trap dollar perspective, keeping it all within the ecosystem is very, very positive from an economic perspective for Nigeria. But then if we zoom out just a little bit more, let's just think about what's going on in the world.

14:59We think about refineries being shut down. We think about the Strait of Hormuz being inaccessible. So those refineries aren't able to get the finished product out of that strait. We think about decreased capacity of refineries in Eastern Europe relating to the Russia-Ukraine war. We think about the lack of oil coming out of Russia due to sanctions. So there's extremely tight, not only resulting in very high oil prices, but also resulting in very, very high, what we would call in the industry, and I know that this is one of your favorite phrases, crack spreads. You guys talk about crack spreads on your podcast, don't you, Ed?

15:42actually I should hand this one over to you yeah I was gonna say I did see in your notes crack spread question mark but really you're speaking to the absolute wrong person here this is what well up will the lucy our ceo and former freight favorite of a little bit of wti crude futures used to trade back in back in the day but uh the only thing I can tell you about the crack spread is is really from your notes which is this idea of then the I think the cracking terminology comes from the difference between the price of crude oil and the petroleum product derived from it so this is when you get like the byproduct by cracking it of gasoline diesel and so forth which then has the the use case in its various different forms um so and my gosh i put a chart in our notes and the crack spread the difference between the price differential between getting the oil into the refinery and getting it out of the refinery, the cost of the refined product is at an all-time high, close to$70.

16:47So this is an insane, you know, from very, very low, you know, single digits and low double digits beforehand. So this, the importance of refineries should not be underestimated. It's so easy to look at the price of oil from a per barrel perspective. But what actually hits our pockets, as anyone that drives a car, non-electric vehicle knows, that is in part down to the tightness of this refinery capacity.

17:22Any anthropic or open AI getting in on the investment here for the Nigerian? No, absolutely not. Well, not as far as I know. I did put a little screenshot as I was researching. I thought this was fantastic. As I was researching, I was on some kind of nerdy natural gas website looking up 321 crack spreads. And on the right hand side, there was an advert. And you know the font for School of Rock, that kind of red, kind of italic, almost rock font. they're advertising to me the School of Energy masterclass in natural gas. So I don't know, maybe I'll click on that. Maybe I'll become a master. School of Energy.

18:04There you go. Maybe I should get paid for this. There you go. Unfortunately, this is not a key sponsor of the show. If anyone from their marketing department is listening, we are more than all ears. So let's move over to Russia, which is always a super interesting one. You probably get more of it. I know our audience is quite split between UK-based listeners and those in America. But I guess in the UK, you have a lot of familiarity with Russia in terms of their investment, the presence in London, sanctions, things of that nature. You're probably a little bit removed if you're American, I would have thought.

18:40But what's this company, Look Oil, which is actually an extremely large company I know, and what's their involvement with the private equity firm, Carlisle? This episode is brought to you by Indeed. You're ready to level up your business, but the pressure to find the right person to make that happen is intense. Indeed Sponsored Jobs can help carry the load. It boosts your job post to help it reach quality talent fast. Cut through the chaos with Indeed Sponsored Jobs. Get a$75 sponsored job credit at indeed.com slash podcast. Terms and conditions apply. Hiring now? Then this is a job for Indeed Sponsored Jobs.

19:19Yeah, so this is Russian oil and gas company Look Oil's efforts to divest its international portfolio. And the main private equity player, along with a consortium of other parties that it's got along to the table, is Carlyle. And Carlyle, the big multinational private equity firm, basically wants to buy the Look Oil assets that reside outside of Russia. Now, we all know that Lukov, along with many other Russian companies, are subject to very, very severe punitive sanctions. And therefore, this cleaving out of the international assets from the Russian Topco, the Russian headquartered company, is proving to be extraordinarily difficult.

20:17there has been a signed agreement between Look Oil and the Carlyle Fronted Consortium that has been awaiting government approval from the Trump administration for over 10 months. And I'm just going to read from a kind of Kafkaesque article that I read about the situation. It says, the decision has become bogged down in an interagency process involving the National Security Council, State Department and Department of Energy, the people said. We lost track of it. It has just gone nowhere, said one person involved in the process. It has been sitting there languishing, waiting for what I don't know.

21:00So just imagine, you know, when you're doing some annoying administrative bureaucratic task, trying to get your passport renewed or trying to pay some kind of tax, and you think that it's just got lost somewhere. And you're getting yourself quite worked up because you're like, someone needs to be able to sort this. Where has this gone? It's dropped between two different organizations or two different departments. Imagine that, but on a$20 billion scale. I guess when it's like multi-agency and jurisdiction and so forth, no one wants to take ownership. And the assumption is someone else is doing their part.

21:37I can see how this can become a complete mess. But what are we actually talking about in terms of the assets then. So it makes sense. You're looking to carve out the outside stuff that's still usable in a way to the wider world. So what are we actually talking about here? Yeah, so these are some pretty important assets. I mean, in this world of high oil prices and high crack spreads, everything is an important asset when it comes to trying to lower the cost of the pump and things like that. But there are oil and gas fields from Iraq to Mexico, alongside petrol stations and refineries across 17 countries.

22:17Importantly, the refineries are based in Romania and Bulgaria. And at the moment, obviously, we're in a bit of an energy crisis in Europe. look, these refineries are just not, they are still operating, but they're operating well underneath their capacity. There is a temporary, there's a US granted temporary license to continue to refine these products that is set to expire on October the 22nd. And we're talking here about 400 ,000 barrels of oil a day refinery capacity over in Eastern Europe. If you think that the seventh largest refinery is 700 ,000 barrels, this is a significant amount of refined product that is being made unavailable or less available due to the fact that Look Oil is under such severe sanctions.

23:16and there is not this ability yet to cleave out those international assets and give them, well, Carlisle to acquire. And therefore, if the structure is right, they can become non-sanctioned entities and we can really start to ramp up refining capacity and all that kind of stuff. If I work at Carlisle, what's my incentive? I'm assuming then that there's massive upside here if you can pull this off. But I'm assuming now I need to woo the administration. I need to get the Russians on board. It seems like I'm going to have to put some very heavy hitting people on this to pull it off. It's going to be very long, protracted, and we're in the midst of an AI boom.

24:05Is there not easier money to get out there than going down this geopolitical minefield? Yeah, I think, weirdly enough, it hadn't come to me when I was thinking about geopolitics and Russia and Lukoil, but this is a very sage bit of advice for any young person trying to start a business. Sometimes doing the really, really, really difficult thing is the best thing that you can do from a barriers to entry perspective. It is so easy for me now to think of an idea and vibe code it into something, right? Extremely low barriers to entry, get it out there. Talk is cheap. It could be good. It could be bad.

24:46Whereas this is worth it, A, because it's extraordinarily difficult, and therefore there aren't many other players willing to put in that amount of work. and B, because these assets got valued three years ago at$22 billion. That's including the Kazakh assets, which aren't part of this deal. But three years is a long time. These assets have only become more valuable in this environment. So it's one of those things that you put in the work, you put in the hard yards, and you get your return. We hope, or the guys at Carlyle hope, I suppose. all right well let's let's keep keep the show moving and also if you've got this far you've enjoyed the conversation don't forget to like and subscribe we'd really love to grow the channel further we have indeed actually has a really good headway over the last few episodes so thank you so much if you're returning again we have the global markets and the deal making episodes coming out twice a week but back to the next story Trafigura and their super tanker ipo so maybe just a bit of framing first who are Trafigura yeah do you know who Trafigura are well do you know anyone that works there it's like these it's like this is the great thing about this episode it's like the hidden hand that makes the world go around because you know people know I don't know let's go back to that example we always use, cursor.

26:20Cursor is worth$60 billion. And if I went out on my local street here and I said, oh, if you heard of cursor, absolutely no one in my town probably has heard of cursor. And yet Trafigura is someone that's the world's second largest oil trader, absolutely critical to the infrastructure, as you said, that makes the world tick. It's like The hidden forces that move things around are the ingredients for everything that we go to the supermarket, that we consume, that we power things. And yet no one's really heard of it. It's so interesting. Yeah, I agree with you. Unless you're in our kind of circles.

27:03Traffiger is the world's second largest oil trader. It does a lot more besides. But it trades, well, it's traded about 7.8 million barrels a day. in the last six months. So again, we're talking big numbers and we're going from refineries to unrefined and refined barrels of oil traded around the world. But the way that I like to think about Trafigura and VTOL and other trading houses, physical oil and gas, physical commodity trading houses, I can just imagine one bloke, and I know it's not one bloke, but let's imagine for the sake of this illustration one bloke with a massive screen in front of him with the entire world and all of the ships and all of the oil and all of the destinations and trying to figure out how to get oil from one place to another in a profitable way matching buyer and seller making a bit of a margin all of that kind of stuff and my gosh it is a very very lucrative thing when you get it right.

28:10Anyone who is listening to this, who works in this space, we'd love to show you. There's such a cool platform that the team have just been working on called Commodify. And it does exactly as you described. It's such a cool simulation. We just rolled it out to BP. So my colleague Mitesh is currently out in Houston running this. He's gone from Singapore to Houston. And it's so interesting because that earlier map where you had the refineries was pretty much mirrored over where the geopolitical main choke points are for the major kind of key hubs of transportation of oil and again so mitesh is mitesh is representing the flow of all around the world with his global travel there you go mitesh well done yeah it's been so cool it's a it's a very cool product and and this these companies are extraordinarily profitable so I know a few guys that work at Trafigura and this company is 100 % employee owned.

29:121 ,400 employees are shareholders. I think there's about 15 ,000 employees overall. So 100 % employee owned, not bad for a company which generated about$8 billion in operating profit in H1 alone in the first half of the year. once you take away other costs four billion dollars in h1 was attributed to owners of the company that's about three million dollars per shareholder employee once again i'm sitting back and going why didn't i just go on the traffigura grad team if they had one i probably wasn't smart enough but come on that's cute don't don't look at the average here don't average out my employees Nice.

29:56So the story. So Traffic Bureau, one of the second largest oil trader. So it's recently launched for Lare shipping. It's a super tanker arm consisting, comprising of 14 vessels, six very large crude carriers, VLCCs, and another eight currently in construction. it's planning to raise 500 million dollars in a private placement by the end of september beginning of october so very very shortly and then float subsequently on norway's euronext growth index uh stock exchange in early october to raise capital to build a bigger fleet their ticker by the way which i quite liked their ticker is going to be vlcc and for shipping nerds that's quite cool okay you you can't just keep it for the nerds what does vlcc mean so this is a very large crew carrier so this is one of the big boys right one of those ships that you see and go my gosh it's it's absolutely ginormous and i'm just going to tell a very short anecdote for one of my friends that used to work in shipping he was on a grad scheme it was a very very long time ago he was on a grad scheme and he was uh working for a company out in asia and he in order to understand what shipping looks like they put him on a ship for a few months cargo ship and in the middle of the night and this was some some you know cambridge graduates in the middle of the night four o 'clock in the morning they got uh the rest of the crew got him up and they're like no you know You've got to get up.

31:39You've got to get up. We're having a real problem here. And this dazed and confused 23-year-old gets up, walks out, and they're guiding him. They're guiding him. And then they push him off. He thinks he's being pushed off into the ocean. They just pushed him off into the swimming pool that's on the large ship. And he's obviously all flustered. But that is the initiation that a young, posh graduate from the UK, when he's out with the shipping guys, in East Asia on route to Papua New Guinea. It's a funny old business, shipping. So the idea here then is, is this a bet that they foresee that the direction of travel geopolitically as a resource in terms of its demand, its ability to be able to access these products, which is becoming almost increasingly challenging, the better and bigger infrastructure you have is going to benefit the company the consumer and also they've got scale that already exists through their broader business and therefore beefing this up they're just going to widen the gap with the competitive advantage that they've got yeah you're absolutely right so there's definitely a timing element here and these ships these 14 vessels they are going to be made available for what's called spot shipping.

33:02So there are two different types of shipping. I'm sure there are plenty more. But the first is contract shipping, where I know that I have a pretty regular route from A to B, and I need to utilize that route 10 times a year or whatever it might be. And I enter into a longish medium term contract with a shipping company to transport that cargo, right that works really well in very very stable times when we know that the stuff is coming out we know there's a shipping lane to open and we know where it's going to go to no tariffs no wars no short-term issues with refineries whatever it might be obviously over the last few years that has all gone somewhat to pot and these long-term contracts are being left either unfulfilled or they've been broken or there's been what they call force majeure, which is an act of God that has invalidated these contracts such that now a lot of these companies that need to get oil from A to B need to access the spot market, very, very short-term day rate for very large crew carriers and go, hey, look, I need to get this.

34:25I need to get this out of my refinery or I need to get this out of my terminal in the next six days in order to be able to fulfill the order that I've been placed. So instead of having that contract because it's all too volatile and we don't know what's coming and what's going, we rely on the spot shipping market. Now, the spot shipping market has absolutely exploded. So recently, rented tankers, the LCCs have hit an all-time high of a million dollars a day for voyages into and out of the Gulf and actually upwards of$800 ,000 a day outside of the Gulf. So it's brought the whole market up with it.

35:07And therefore that presents a huge opportunity bearing in mind that spot rates were down at 60 ,000, 50 ,000, 40 ,000 a day in the good times of 2011, 12, 13, 14, 15. So yeah, this is opportunistic. It's smart. It's an interesting move from Trafkura. Anything else to mention just on the rationale here strategically before we move on to the final story? Yeah, so there's definitely strategic rationale. I think it's definitely worth mentioning why these rent rates, these spot rates have increased by so much. So obviously, we've got the Strait of Hormuz shutdown. And I just put a little image in our notes, looking at the volume of ships going in and going out.

35:53This is from Trafguer's research. And it's quite crazy to see the precipitous drop. That means that demand is still there. Supply is not there. What does that do? It bumps up the price. so also just to kind of continue on this why the five times increase so middle eastern oil companies like saudi aramco have started buying their own vessels for exclusive use so that means that there's less available vessels behind to hire in the spot market couple that with russia and china also being also buying vessels to expand what they call their shadow fleet or what we call their shadow fleet. So lots of supplies being taken out, lots of demand is remaining, and therefore it's a great time to launch a spot shipping business.

36:46Furthermore, if you're Trafigueroa, you might well have an information edge when it comes to trading, right? So you will be the first potentially to know whether there's a choke point, whether there's a really big spike in demand or maybe an excess supply or whatever it might be, this is just going to add to the information advantage that makes Trafigura the second largest and one of the most successful oil traders in the world. So it seemed pretty smart to me. At this point then, are you going into the Trafigura Supertanker IPO or the Nigerian refinery IPO? I was floating around with it. I'm going Trafi.

37:30The Nigeria valuation, I didn't even mention this when we covered the story, it's up at$50 billion. This is an expensive IPO for a refinery that costs$20 billion to build. And there was a private placement that went on a few months before for inside investors that was at a discount for that$50 billion. So it seems like it's nice to give a power to the people but it's quite expensive. I love that. Those inside investors they're going to get paid on the behalf of the consumer who's bought at the top of the market when it all sells off, when it goes public. Yeah, I wasn't going to say that. I was going to just leave it as a good news story but I had to bring it in there.

38:11So I'm going team Trafi and that's only because I want a job with an equity state. Anyone's calling. Alright, well look, to conclude then, let's bring it back home, a little closer to home at least, with the Irish-based DCC Energy being acquired by KKR and ECP. So what do we have here? Yeah, so what I love about this episode is that we've really traveled through the production, the refining, and the transportation process of oil and gas through three different examples. We now land at a company called DCC Energy, which is the end-user-facing part of this whole story, albeit it focuses a little bit more on different energy products, liquid gas, liquid fuels, biofuels, biogas, solar power, on-grid gas and power.

39:05So a lot of the refined products, but also with some renewables in there as well. But DCC, excuse me is a footsie 100 or at the moment is a footsie 100 irish based gas and energy distributor that over the period of the last few months has been subject to multiple rounds a little bit like the easy get story that we covered a few months ago multiple rounds of bids from kkr and energy Capital Partners. Best known, by the way, and I was just doing my research on Energy Capital Partners, best known in the UK for their buyout of Biffer. Do you know Biffer? Not the sexiest company we've covered on the market maker.

39:52Not sexy, but essential. Yeah. So in January 2023, ECP completed the 2 billion take private Biffer, a leading UK-based integrated waste management, and I love this, and circular economy business. I mean, that's wonderful. Circular economy, you recycle everything, and it's a very green and lovely thing. In my mind, I just see the big biffer. Shugging along down your normal, you know, suburban street. Exactly, waiting to pick up all of my ghastly rubbish. But anyway, so that's ECP. So KKR and ECP have been after this asset for a very long time. And their thesis is that it is very undervalued on the public markets.

40:39And quite frankly, if you look at DCC share price, up until the speculation around an acquisition, it's been languishing. It's been going, if anything, downwards as opposed to upwards. And that is obviously when these types of companies become exciting targets for the likes of KKR. They're like, all right, public market doesn't understand it. It's being punished for its slightly messy strategy. We're going to come in, we're going to put a bit of debt into it as these private equity firms tend to do. And then we're going to try and clean it up and improve it and sell it on the way the way that that would work then would someone like a kkr would they have like a rolodex a black book of executives who work in this space and it's almost like they have this three to five year window well they'll do what you said they'll send in this crack squad leader or management team flip it then this team are now rolling off and that other company is going to be sold onto the next PE firm.

41:53Is there some sort of timing aspect of there's only probably so many people that are good at these turnaround jobs for specific sectors, I would imagine? Yes, absolutely. They will have lined up the right people to come in that aren't necessarily part of KKR, but they would be called an operating partner, an expert in that space, to come in, join the board, maybe join the executive team. there will be this three to five year strategy as you said maybe five to seven year strategy and very importantly kkr will know kkr and its and its partner will know who and where this is likely to end up in five years time never ever do an investment if you don't know what the exit is right so there'll be there'll probably be conversations going on with the buyers in five seven years time, or at least kind of a understanding of where the exit might be, such that we buy this company for X, we get the crack squad in to do what we need to do.

42:55We think that we can sell it for Y, all things being equal to A, B, C, or D, either private equity firm, strategic buyer, or maybe even an IPO if the IPO markets were covered. What might happen, as an aside, is that KKR buys it, improves it, or at least does a decent job with it, and then they list in the US. And this has been the fate of quite a few Irish companies, for example, CRH, that was listed in the UK, and they changed their listing to the US. So this might almost be a bridge to valuation arbitrage to get that higher New York Stock Exchange valuation a few years hence. and by the way and by the way a bridge to valuation arbitrage is the kind of phrase my parents don't understand and rightly so so apologies for that waffle well if they've held on to listen to us for this long they really do love you steven so uh to finish then is there any uh foreseeable objections that you can foresee for this deal to to go through to to fruition?

44:03No, well, there was for a very long time. But thankfully, from a KKR perspective, from a deal completion perspective, maybe for the bankers at Goldman Sachs and Morgan Stanley, Barclays and BMP, there was a shareholder vote. 78.1 % of shareholders approved the acquisition just enough to bypass the 75 % of votes needed for the deal to go through in the extraordinary general meeting. You obviously have your AGMs, your annual general meetings. This is an extraordinary one. So 44 million shares voted in favour, 12 million shares voted against. There's a few that withheld. So it has effectively passed.

44:46There's some very grumpy shareholders that might kick up a fuss, but that is probably the key moment, that shareholder vote. Yeah, I could see there's a, quote another Stephen, Stephen Carroll, one of these grumpy shareholders at the EGM, calling out the board for selling out to bargain and hunters. So yeah, it's a, it reminds me of, what was the program on Sky Atlantic that was on Succession when they used to have their AGMs and they're like, no way we're going to do this. Yeah. I mean, if Stephen Carroll is listening to the podcast, you know, shout out to you. I don't know whether that Stephen Carroll is a shareholder that represents a very large block of shares, like an Aviva, or maybe he's one of those wonderful cranks that owns one or two shares in order to go to the AGM and put their hand up and ask a question.

45:38So whichever one you are, Stephen Carroll, well done. Yeah. All right. Well, look, let's wrap it up there. Any questions at all? As usual, please feel free to drop us a comment. And yeah, please do share the pod with a colleague or a friend if you've enjoyed it. We'd love to get the show out to more people. All right. Thank you, Stephen, as always, and I'll see you next week. Thank you, Anne.