London — Private equity giant Carlyle Group has doubled its stake in Varo Energy, a downstream venture with the world's biggest independent oil trader Vitol, buying out the third partner, the companies said Feb 3.

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Under the deal, Carlyle will acquire the 33.3% Varo stake owned by Reggeborgh, a Dutch private investment company, making it the majority owner with a 66.6% interest, a Carlyle spokesman said.

Vitol's 33.3% shareholding in Varo remains unchanged under the deal, the companies said.

Switzerland-based Varo was created in 2012 with the aim of becoming a "major midstream energy business in Northwest Europe", after buying the 68,000 b/d Cressier refinery in Switzerland and a 51% share in Germany's 215,000 b/d Bayernoil refinery. Varo also owns storage facilities, distribution, and marketing businesses in Benelux, France, Germany, and Switzerland.

No financial details of the Carlyle deal were given but Varo was valued at about 2 billion euros ($2.4 billion) when it planned to list on the Amsterdam stock market in 2018 to raise funds for further downstream expansion. The listing was canceled, with Varo citing high market price volatility.

Carlyle said part of the rationale for the majority stake in Varo was the opportunity to build a "leading energy transition company", suggesting it hoped to expand into biofuels production.

"Our investment thesis for Varo seven years ago was to build a refining and marketing platform of scale in Europe," Carlyle's head of International Energy Partners unit, Marcel van Poecke, said in a statement.

"Since then, Varo has chartered an impressive growth trajectory and we are delighted with what has been achieved. We believe there continues to be strong opportunities for the company's future growth as it leverages its solid platform and further capitalizes on the opportunities presented by the shift towards low carbon."

Biofuels expansion

Varo already sources, blends and markets biofuels in Western Europe, where demand for low-carbon fuels is growing fast driven by EU mandates. Varo is focused on the bio-component element of it fuels and generates a significant part of its income from those streams, the company said.

"Varo's distribution footprint and supply relationships can accommodate fuels with higher renewable content. The business' core markets across Western Europe include countries at the forefront of embracing the shift to a lower carbon future," Varo said.

European refiners have been stepping up plans to convert ageing refining capacity to biofuels in recent years as regional oil demand declines and competition from new export-oriented plants in Asia and the Middle East ramps up.

Vitol has stakes in five oil refineries globally as part of its stake in Varo Energy, three in Europe and one each in the UAE and Australia.

"We believe Varo has a key role to play in Europe's energy transition," Vitol CEO Russell Hardy said. "It will deploy its assets and expertise to offer customers optimal energy solutions as their needs evolve."

Equity for the transaction, which is subject to regulatory approval, will come from the Carlyle International Energy Partners II fund, which invests in oil and gas assets outside North America.