MOOD ‘SHIFTS IN FAVOUR OF COUCHE-TARD BID FOR CALTEX’

PERRY WILLIAMS
FEBRUARY 14, 2020

The Australian 

Caltex will make a decision early next week on whether to offer full due diligence to Couche-Tard after chairman Steven Gregg held ­extensive talks with investors over the Canadian’s $8.8bn bid.

After Couche-Tard lobbed a third takeover offer of $35.25 a share on Thursday, Mr Gregg ­immediately hit the phones and held conference calls with top 10 shareholders to gauge their appetite for the higher price.

While the fuel retailer rejected an ­initial proposal of $32 a share in October and a bump to $34.50 in late November, the latest bid represents a tempting payday for shareholders amid volatile conditions in the oil refining industry.

One top five shareholder told The Weekend Australian the mood during the call with Mr Gregg may have shifted in favour of a deal being struck.

“Certainly in the absence of any rival offer, there was a feeling this might be as good as it gets,” the shareholder said. “Those who dismissed earlier bids from the Canadians out of hand are now potentially coming around.”

Couche-Tard has declared its latest proposal a best and final price if no competitors emerge with their own offers.

Caltex may consider granting a four to six-week period of full due diligence after granting Couche-Tard access to select non-public information early last month.

Shareholder Merlon Capital Partners was among investors in December disappointed at Caltex’s rejection of the $34.50-a-share offer that valued it at $8.6bn.

Merlon, which holds 1 per cent of Caltex stock, said it harboured particular concerns over Caltex’s dismissal of the Canadian suitor’s franking credits offer. The fuels ­retailer must now move to a formal due diligence offer, Merlon said on Friday.

Couche-Tard “wouldn’t have done accounting, financial or legal diligence”, Merlon’s Hamish Car­lisle said. “One of the important things is to negotiate the due diligence scope and assumptions to minimise the risk of a transaction tipping over during the process.”

Couche-Tard’s revised proposal is subject to conditions, including completing due diligence.

The Canadian’s bid “is not a knockout price but it does force would-be competitors to make a proposal”, Ord Minnett said, with EG Group and Macquarie considering their own joint tilt.

“EG and Macquarie have been suggested as a consortium, which makes intuitive sense to us, ­although ACCC risk for EG is significant,” the broker said.

EG has grown rapidly in Europe, the US and Australia, building a network of about 5000 fuel stations and convenience stores in a series of debt-fuelled acquisitions capped by last year’s $1.7bn deal for Woolworths’ network of 540 petrol stations.

Couche-Tard had considered forming its own consortium including IFM Investors and Tra­figura, indicating the lead suitors are likely to split up Caltex should they ultimately prevail with offers.

Neither Couche-Tard or EG control any refining assets as part of their own portfolios.

Caltex on January 8 flagged a potential break-up of its wholesale and retail fuel arms, confirming it had fielded multiple approaches for all or some of its assets, including one from EG.

US energy major Chevron is also being closely watched after it paid $425m in December to scoop up Puma Energy — Australia’s largest independent fuel retailer — just four years after selling its stake in Caltex.

Caltex Australia controls about 34 per cent of Australia’s wholesale fuel market, along with 25 per cent of the country’s fuel refining capacity and up to 17 per cent of ­retail fuel sales.

Caltex shares fell 0.53 per cent to $33.55 on Friday.