CALTEX REJECTS COUCHE-TARD TAKEOVER BID

·         PERRY WILLIAMS

•  DECEMBER 3, 2019

The Australian 

Fuel retailer Caltex has rejected a $8.6 billion takeover bid by Couche-Tard but has left the door open for the Canadian convenience giant to return with a higher offer after granting limited due diligence to its suitor.

Caltex said the $34.50 offer on the table undervalued the company and did not represent “compelling value” for shareholders but said it would provide selected non-public information to the multinational.

The offer, Couche-Tard’s second bid after an earlier $32 offer was rejected in October, only represented a 16 per cent premium to Caltex’s closing share price before the offer was disclosed.

“While Caltex has rejected the Proposal, Caltex has offered to provide Couche-Tard with selected non-public information to allow Couche-Tard to formulate a revised proposal that appropriately reflects the value of Caltex,” the Sydney-based company said in a statement. “There is no certainty that the discussions between Caltex and Couche-Tard will result in a revised proposal from Couche-Tard.”

A strong of major shareholders including Investors Mutual, Airlie Funds Management and Pengana Capital all said the offer undervalued the company and a bid of closer to $40 a share was required to get a deal over the line.

Caltex chairman Steven Gregg said the board would consider offers that maximise shareholder value.

“Caltex has a well-developed strategy, privileged assets, strong leadership and compelling growth opportunities that the Board believes will deliver attractive value for its shareholders over time,” Mr Gregg said. “We look forward to sharing further details on the execution of our strategic plan at our Investor Day on 5 December. The Caltex Board is focused on maximising shareholder value and will carefully consider any proposal that is consistent with this objective.”

Part of Couche-Tard’s pitch for the Caltex deal is unlocking $830m of franking credits with plans to pay a special dividend of up to $8.41 a share to release the credits, boosting the deal value by up to $3.61 per share.

However, Caltex said most of its shareholders would not receive the cash benefits proposed by the Canadian company noting franking credit distributions would differ depending on investors’ tax rates.

Caltex estimates shareholders would gain about $1.66 per share – or half of Couche Tard’s assessment – based on shareholders being subject to superannuation fund tax rates of 15 per cent.

“The board recognises the value of Caltex’s franking credits and the importance of realising this value for shareholders in a timely manner,” Caltex said. “A significant proportion of Caltex’s current franking credit balance is expected to be distributed to Caltex’s shareholders as a result of strategic initiatives that are currently being implemented, including the proposed property IPO and the divestment of 50 metropolitan freehold sites identified as having a higher value through alternative use.”