Z Energy is being lined up for a stock exchange listing in the third quarter of this year in what could be the largest float outside of the state-owned power companies.
Analysts say the petrol business could be valued at up to $1.2 billion potentially putting it in the top 20 largest companies on the New Zealand exchange.
Z is jointly owned by infrastructure investor Infratil and the New Zealand Superannuation Fund, who paid $696.5 million to buy the business from Shell in 2010.
The Super Fund and Infratil's investment manager Morrison & Co have declined to comment on the potential float.
But the Herald understands Infratil has been reviewing its capital structure and both Z Energy and NZ Bus could be put on the block to free up capital for it to make other investments.
Sources say Infratil and the Super Fund are likely to keep half of their stakes in Z Energy with around 50 per cent of the company floated.
Market expectations are that the potential float could be publicly acknowledged at Infratil's annual investor conference on March 7 and 8 ahead of a July listing date.
Infratil put out a statement in response to this news saying it reviews its portfolio on an ongoing basis though has "not identified any particular investments for sale at this time."
"We've not decided to sell anything," said Jason Boyes, head of legal at Morrison & Co. "We were worried retail investors might think we've progressed down a path with particular assets" after reading today's report.
Analysts have been speculating on which assets could be sold, he said.
Grant Swanepoel, an analyst at Craigs Investment Partners, said Infratil needed to consider unlocking the value from some of its investments and listing Z Energy on the sharemarket would be one way to do that.
"It does make sense. Doing it now would take advantage of the favourable market conditions."
Swanepoel said Infratil and the Super Fund had bought the business at the bottom of the valuation cycle when its rival Caltex was trading on four times earnings.
Caltex was now trading on six times earnings and on top of that Infratil had also cleaned up the business.
As well as rebranding the business from Shell to Z Energy, Swanepoel said there had been a lot of changes on the forecourts with lucrative car washes added to some stations and many of the poorer contracts replaced.
The company had around $400 million of debt and Swanepoel said he would expect a net yield of around 6 per cent, making it attractive to retail investors.
That could value the company at between $1.2 billion to $1.4 billion, he said.
Forsyth Barr head of research Rob Mercer said the acquisition of Shell had not been well liked by some in the market and the company had spent a lot of time convincing people that it was a good idea.
Since then a new chief executive had been appointed and a strong management team had been put in place.
"I think that people would have confidence around the management of the business given the work that has been done."
Mercer said good management was a key factor in attracting investors.
"Ultimately a listing at some point is something that is anticipated."
Mercer believed Infratil's half share in Z Energy was worth $400 million and if it was sold it would be a significant gain on the $225 million Infratil paid for its share.
But others are less convinced of its attraction.
Rickey Ward, head of equities at Tyndall Investment Management, said he had never been keen on the Z Energy business and it could be harder for investors who bought into the float to make a gain.
"It's easy to make gains initially - it's hard to make the gains thereafter."
Ward said he expected any float would be marketed with a dividend yield focus to target retail investors looking for a better return on their money than in the bank.
Hamilton Hindin Greene client adviser James Smalley said Z Energy would be a name potential investors would be familiar with but he questioned where growth would come from given the oligopoly in the oil market and tough competition. "It might be good with yield. But where is the growth coming from?"
Smalley said it would also matter how much skin Infratil and the Super Fund kept in the game through holding on to part of the business.
"I think they will have to, to get investors to take it up. I think investors will be looking for that, not a cashing up of all the chips."By Tamsyn Parker Email Tamsyn