Caltex has revealed that the $8.6 billion takeover offer from Canada’s Alimentation Couche-Tard has spurred approaches from other suitors including Britain’s EG Group, indicating the real possibility of a bidding war for the Australian fuel supplier.
The disclosure follows a media report on Tuesday that said private equity-backed EG Group, which last year acquired the Woolworths petrol station network in Australia in a $1.7 billion deal, is considering making a rival offer for Caltex.
The report from Bloomberg News pushed Caltex shares up beyond Couche-Tard’s rejected offer of $34.50 a share, closing Tuesday 2 per cent higher at $35.05.
The stock climbed further in early trading on Wednesday to $35.38.
“Since announcing receipt of an unsolicited, conditional, confidential, non-binding and indicative proposal from Alimentation Couche-Tard Inc. to acquire all of the shares in Caltex, Caltex confirms it has had approaches from a number of parties, including EG Group, who have indicated that they are potentially interested in making a proposal to acquire Caltex or some of its assets,” Caltex said in a statement to the Australian Stock Exchange on Wednesday. It had refused to comment on the situation on Tuesday.
Caltex added it had not received any proposal to acquire the business since Couche-Tard’s offer, which it disclosed on November 26.
“There is no certainty that any binding proposal will be made by any of the parties who have expressed potential interest,” it added.
Sources say EG, which was founded in 2001 by brothers Zuber and Mohsin Issa and is backed by TDR Capital, would likely need a partner to proceed with a firm offer for Caltex given its focus on fuels retailing and Caltex’s ownership of a refinery and fuels trading and distribution business as well as petrol stations and convenience stores.
However a similar issue arises with Couche-Tard, a giant in convenience retailing that has no refining assets within its global portfolio.
The future of Caltex’s Lytton refinery is expected to emerge as a central issue in any takeover deal for the Australian company given it is one of only four oil refineries remaining in the country where security of supply in liquid fuels has become a hot political topic.
Both Couche-Tard and EG would need approval from the Foreign Investment Review Board to complete a takeover of Caltex.
EG’s ownership of the 540 Woolworths petrol stations is also expected to raise concerns within the Australian Competition and Consumer Commission, although Citigroup energy analyst James Byrne said on Tuesday he expected those could be addressed by a requrement by the competition watchdog to divest individual sites.
“What’s clear in this industry is that if the ACCC does take issue with overlap of store locations that the bidder can acquire and on-sell problematic sites,” Mr Byrne said.
Caltex and Couche-Tard are expected this week to resume meetings after the holiday break to hammer out confidentiality agreements and logistics for a presentation to take place by Caltex senior management to their counterparts at Couche-Tard. Caltex has signalled it could be open to a price north of $34.50 a share, although Couche-Tard has described that price as compelling.
The heating-up of the mergers and acquisitions activity around Caltex comes after it announced before Christmas that its former 50 per cent owner Chevron was taking back the Caltex brand and that it would transition to the revived Ampol brand over the next three years at a cost of up to $165 million. Chevron had only the previous week surprised the market with the news it would re-enter petrol and diesel retailing in Australia through the $425 million takeover of Puma Energy’s local network from commodities trader Trafigura.
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