Caltex Australia’s $10b battle only just beginning

Sarah Thompson, Anthony Macdonald and Tim Boyd

Nov 26, 2019

AFR

It’s popcorn time at Caltex Australia.

Just as dealmakers were trying to clear the decks ahead of the summer holidays, there’s a big battle brewing that threatens to put vacations on hold.

In the blue corner is Canadian convenience retailer Alimentation Couche-Tard, worth about $60 billion, which wants to buy Australia’s Caltex for $10 billion.

In the red corner is Caltex, which has been fending off break-up calls for years and cannot seem to find a way to unlock value from its giant $834 million pile of franking credits.

Couche-Tard started the battle with a $32 a share indicative bid last month, before returning at $34.50 last week. Its punch was laced with a franking credit pitch, telling Caltex shareholders its bid could be worth up to another $3.61 a share for the right investor.

Caltex batted away the first and is still considering the second. Its defence started with long-awaited plans to just do something; and its something of choice was creating a new property station trust and floating it on the ASX, cheekily announced this week.

The question is whether there are any other starters – and who they may be. Couche-Tard and its advisers Goldman Sachs and Allens should have a good lay of the land, having been in the Woolworths petrol auction last year.

Street Talk revealed its interest on Tuesday morning.

Should UBS and Grant Samuel-advised Caltex set up a data room on the back of a $34.50 a share indicative bid – and that is not guaranteed – you would think it would spark another tyre-kicker or two into action.

After all, there are plenty of Caltex sum-of-the-parts valuations in industrial banker pitchbooks that are updated regularly in anticipation of the brewing battle. Macquarie Capital – for years Caltex’s house adviser – would be sure to have a few ideas, while Citi also has long ties to the fuels company.

While Caltex shares jumped 13.4 per cent to $33.79 on Tuesday, it is worth remembering Couche-Tard is at square one. While the Canadian convenience retailer has had a big team running the numbers on Caltex, it has been looking from the outside.

It is understood Couche-Tard has had no due-diligence materials or management meetings, and has not even had the chance to negotiate customary actions like standstill or confidentiality agreements. Although it does have a 2 per cent stake.

There’s clearly plenty left to play out.