Ampol is set to sell Gull to an Australian private equity firm for $572 million, swapping the fuel retail network for Z Energy’s operation.

The twist is that the Sydney-based buyer, Allegro Funds, is a ‘turnaround’ investor, which specialises in buying failing businesses and rescuing them.

Allegro manages more than AUD$3 billion (NZ$3.19b) and is currently raising its fourth fund with a target of AUD$600 million.

The hefty purchase of Gull is being financed by Ares Capital and ASB Bank.

The Gull business in NZ operates a network of 112 primarily unmanned fuel service stations and a fuel import terminal at Mount Maunganui.

Ampol said Allegro would retain its current general manager, David Bodger, and his management team.

This is an unusual move for the private equity firm, which pitches itself as a “turnaround and special situation” investment fund.

Allegro’s investment criteria says it seeks mid-sized businesses, revenue over $100 million, that are “in industries experiencing temporary headwinds or businesses with an over-levered capital structure”.

Buying up debt

One of the firm’s founders, Chester Moynihan, currently sits on the board of Pizza Hut, a once wildly popular fast-food chain that has been supplanted by Dominoes in recent years.

A case study on its website tells the story of Vulcanite, a subsidiary in a diversified engineering group that had let revenue fall more than 20% in two years.  

“It was against this backdrop of declining revenue, product quality issues, poor customer management and underinvestment that Allegro stepped in,” the fund manager said.

Allegro said replaced the management team, fixed its debt problem, and established an international sales team. Revenue then doubled in five years.

In NZ, Allegro owned The Interiors Group – which it recently sold to Pencarrow Capital – having bought it from “the verge of receivership” in 2015.

In Australia, it is buying up debt in a struggling after school care business called Camp Australia, hoping to take over control of the business.

Gull is not a business unreasonably beleaguered by debt – it has $63 million of leases and debt-like items – or a poor management team.

It is a sunset industry, with the brewing climate disaster forcing a shift to electric vehicles and public transport. 

But it is not immediately clear it is a business in need of the rescue Allegro generally offers.