Caltex IPO in doubt after $8.6 billion takeover bid

Caltex Australia has confirmed that it received a $8.6 billion takeover offer from Canadian convenience store operator Alimentation Couche-Tard Inc. to acquire all shares in the company.

The fuel and convenience retailer said in a statement to the ASX on Tuesday morning that the offer was “unsolicited, conditional, confidential, non-binding and indicative”.

The offer came less than 24 hours after Caltex announced its intention to undertake an initial public offering (IPO) of up to a 49 per cent interest in 250 freehold sites.

The Australian Financial Review described the IPO as a defensive tactic to unlock capital in the company. The move would not be possible under the conditions of Couche-Tarde’s offer, made on November 18.

Caltex said the board is currently considering Couche-Tard’s proposal and obtaining advice from financial and legal advisers.

The indicative cash price per share is $34.50 less any dividends, with the offer following a previously rejected bid of $32 per share.

“We believe this is a very compelling offer for Caltex shareholders, representing an excellent premium and certainty of value today,” Brian Hannasch, Couche-Tard’s chief executive, said.

He said Couche-Tard, which operates over 16,000 convenience stores in North America and Europe, mostly under the Circle K brand, had been looking into the Asia-Pacific region for several years as a potential market to grow into.

“With Caltex, we see a potential opportunity to leverage our leading global position in the convenience retail market, and we would seek to bring all our operating expertise to bear to help support and grow the Caltex business,” Hannasch said.

The proposal is subject to a number of conditions, including “due diligence, organising necessary financing for the transaction, no material asset sales, divestments or similar transactions” as well as Foreign Investment Review Board approval and the ACT Board and a unanimous recommendation by the Caltex Board.

Success of bid depends on its value

Caltex decided at the start of the year to buy out all of its fuel franchisees by 2020, but admitted in August it was still learning from its convenience retail strategy said it would sell 50 of its 790 company owned and operated petrol stations, deciding they were worth more as alternative developments.

Caltex also owns 91 retail sites of the Gull New Zealand brand and a fuel import terminal at Mount Maunganui on the North Island.

The retailer recently opened its first Caltex Woolworths Metro store in North Ryde with more stores to be rolled out in the coming months.

RBC Capital Markets’ oil & gas analyst Ben Wilson wrote in an analyst’s note that the chance of success of the bid largely depended on its value.

“While Caltex is the largest player in the wholesale fuel market (~34% market share), a significant player in retail fuel (~15-17% share) and ~25% of Australian fuel refining capacity, we do not see any prima facie competition concerns with ACT being a potential new entrant into the market,” he wrote.

Caltex shares surged on the announcement and closed 13.4 per cent high er at $33.79.

Ruth Hogan contributed reporting.

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