Galp and Moeve discuss merger of service station networks and refineries

Galp and Moeve’s main shareholders — Mubadala Investment Company and The Carlyle Group — have reached a non-binding agreement to move forward with detailed discussions on the potential merger of their downstream portfolios and create “two leading energy companies in the Iberian Peninsula: RetailCo and IndustrialCo”.

“The planned business combination, which excludes the so-called ‘upstream’, will consolidate complementary assets, capabilities and teams in Portugal and Spain, with the aim of strengthening scale, operational efficiency and investment capacity, while supporting the energy transition and strengthening the resilience, reliability and competitiveness of the Iberian energy system”, Galp said in a statement on the partnership with Moeve, formerly known as Cepsa.

The completion of this transaction will create a retail platform with one of the largest service station networks in the Iberian Peninsula, offering greater choice, enhanced convenience services and greater value for customers. A scalable industrial platform will also be established, integrating refining, trading, petrochemicals and green molecules (biofuels and hydrogen) activities, serving B2B customers with greater efficiency and global competitiveness. Another objective of the merger will be to “enable the scale and investment capacity necessary to accelerate the European energy transition and build the next generation of European energy champions”, Galp emphasised.

The discussions now formally announced will trigger due diligence on the value of the assets within the scope of these operations. Officially, there is no timetable for a decision, but both companies expect that conditions will be in place for a decision by the middle of this year. If an agreement is reached, Galp and Moeve will move on to a second phase of regulatory approvals, which will necessarily include DG Competition, the powerful directorate-general of the European Union. The timetable will no longer be in the hands of the two companies, but given the pressure from Brussels to accelerate green industrial capacity and the energy transition in Europe, Galp and Moeve expect the process to proceed swiftly.

“At the same time, Galp will reinforce its focus on generating value for its shareholders, leveraging its key positions in the upstream segment, with a highly competitive portfolio that remains the central driver of the company’s growth, together with the Renewables and Gas and Electricity Supply & Trading businesses”, the company stressed. “The proposed transaction will enable Galp to further strengthen its strategic focus.”

In the recent past, there have been rumours of negotiations for a shareholder agreement between these companies, which have never been confirmed. However, the complementarity between the two is often pointed out in the market. With one difference: the weight of the so-called ‘upstream’ — that is, the oil exploration business, with emphasis on the recent discovery in Namibia — is worth about 70% of Galp’s cash flow, while Moeve has a limited weight in this business segment, with its strength lying in industry (i.e. refining and chemicals) and in the commercial area – i.e. distribution.

In practice, there are two business models on the table. On the one hand, Galp is spinning off its commercial (service stations, convenience stores and mobility) and industrial (refinery) areas; on the other, Moeve is splitting the company in two, selling off what it (still) has in oil exploration. The combination of the respective areas will create two new Iberian players, and Galp, listed on the stock exchange, will continue as it is today, with the exploration business and shareholdings in these two new Iberian companies. It is also certain that, if an agreement is reached, the service station network brands and the partnerships that exist today in each of the respective markets will be maintained.

How much are the two businesses worth combined? Neither Galp nor Moeve have disclosed the potential values involved in these transactions, but according to ECO/Capital Verde’s calculations, based on the reports and accounts of the two companies, it is possible to estimate the following reference values:

A) Moeve Downstream / Industrial

• Downstream/Energy: €1,453 million, the largest single contributor to the company’s EBITDA, reflecting the refining, trading, marketing and related activities;
• Industrial/Chemical: €253 million represents the contribution of Moeve’s chemical unit in 2024;
• Combined total (Downstream + Industrial): 1,706 million euros.

B) Galp Downstream / Industrial

• Industrial & Midstream: 876 million euros, including refining, logistics, transport and other integrated industrial activities, without separate chemical segmentation;
• Total in this segment: 876 million euros.

Network with 3,500 service stations

Discussions will assess the potential creation of two Iberian energy platforms. One will be a mobility platform focused on fuel retail (including electric vehicle charging) and convenience, to serve B2C customers and support the development of proximity mobility solutions – RetailCo.

“RetailCo will be jointly controlled by Galp and Moeve, with balanced shareholdings, ensuring continued alignment in terms of strategy and investment decisions”, explained the Portuguese oil company, adding that the firm “will become one of the largest mobility operators in the Iberian Peninsula, with a significant market presence through a network of around 3,500 service stations, located mainly in Portugal and Spain”.

In IndustrialCo, an industrial platform focused on refining, petrochemicals, trading and low-carbon fuels, serving B2B customers, Galp is expected to maintain a significant minority stake of over 20%, it said.

Each will have autonomous administration and management, with the respective teams being appointed in accordance with the shareholder positions of each of the groups.

“Creating large European groups”, says Paula Amorim

Quoted in the statement, Galp’s chairwoman, Paula Amorim, said she was “extremely confident” about reaching this “preliminary agreement” and initiating “a discussion of enormous strategic relevance for Europe”.

“Galp’s vision for growth has always been guided by partnerships with highly credible operators who have consistently demonstrated their ability to create value”, she emphasised, before explaining that “by combining the complementary capabilities and experience of Galp and Moeve in downstream operations”, there is now an “opportunity to create large European groups in the Iberian Peninsula, each benefiting from greater focus, adjusted capital allocation and the flexibility essential to drive sustainable, value-generating growth”.

“I firmly believe that this opportunity strengthens our ability to support and promote a fair energy transition, capable of addressing evolving market needs and ensuring a secure and responsible energy supply to the Iberian Peninsula”, concluded Galp’s president.

“A unique opportunity”, says Moeve CEO

Maarten Wetselaar, CEO of Moeve, sees this potential merger as “a unique opportunity to strengthen the Iberian Peninsula’s role in the energy transition by creating platforms with the scale, resilience and investment capacity needed to bring about change quickly”.

Also mentioned in the statement, he pointed out that by combining “industrial excellence, downstream activities and a strong pipeline of low-carbon projects”, Moeve intends to “attract sustained capital and accelerate the implementation of solutions that support competitiveness, decarbonisation and economic growth”.

During the negotiation process, “Galp and Moeve will continue to operate as independent companies, with full continuity of operations, supply and customer service in all activities and geographies”. Given that they are currently competing companies, good governance practices and competition rules require that separate teams work on these operations and that they are not involved in the resulting operational activity.

Furthermore, any potential transaction remains subject to the negotiation and execution of final and binding agreements, the necessary corporate approvals and applicable regulatory authorisations, Galp said. “At this stage, no final decisions have been made and there is no impact on the companies’ ongoing operations, their employees or existing commercial relationships”, it added in the same note to the market.

Galp and Moeve undertake to keep the market, employees and other relevant stakeholders informed, in accordance with their legal and disclosure obligations.