UK forecourt group MFG eyes £2.5bn merger with rival MRH

Motor Fuel Group (MFG), one of Britain's biggest independent petrol retailers, is hatching plans for a £2.5bn merger with MRH GB, a rival operator.

Sky News has learnt that MFG, which is backed by the private equity firm Clayton Dubilier & Rice (CDR), is preparing to table a takeover bid next week for MRH.

A merger would create a fuel retailing powerhouse with almost 900 forecourts across the UK.

MFG is likely to face competition to buy MRH, which is also pursuing plans for a stock market listing later this year, according to City sources.

Rival bidders for MRH could include Euro Garages, another large independent operator, or a new entrant from North America, they added.

The Texan private equity firm Lone Star Funds has set a deadline of Monday for offers, and is said to be seeking about £1.2bn for the company.

MRH trades from about 450 sites, which are largely branded under the BP, Esso (Euronext: ES.NX - news) , Shell (LSE: RDSB.L - news) or Torq names, and include retail partners such as Costa, Greggs (Stuttgart: 41G1.SG - news) and Subway.

Its suitor, MFG, has almost 440 stations trading as BP, Shell, Texaco and JET, as well as a Murco-branded dealer network encompassing 190 stations in England, Scotland and Wales.

Lone Star has owned MRH since 2016, and last year hired bankers at Citi, JPMorgan (LSE: JPIU.L - news) and Numis Securities to oversee a public listing of the company.

Buoyant stock market valuations mean that a float remains a strong possibility, although a bidder such as MFG would be able to identify considerable cost-savings and growth opportunities from a merger.

"MRH and its shareholder are currently assessing a range of strategic options which may include a potential Initial Public Offering (IPO)," the company said in a statement.

"No decisions have been made and there can be no certainty that any process will be formalised."

CDR has made a string of successful investments in British retailers and automotive-related businesses, including the discount chain B&M and the online vehicle auctioneer BCA.

A spokesman for CDR declined to comment on Friday.