After gaining 2 per cent on Tuesday in the wake of a Bloomberg report that EG Group was considering an offer for Caltex, shares in the Sydney-based company gained a further 1.9 per cent to $35.70, the highest close for almost 23 months.
The stock is now trading comfortably above the $34.50 a share proposed by Couche-Tard, which was rejected as inadequate by Caltex’s board led by Steven Gregg.
“There are clearly a number of potential players, and a number of different paths for this to play down,” Mr Samter told clients in a note.
“Given all these interested parties came in after the $34.50/share Couche-Tard bid was made public, it is clear that plenty agree that there is value on the table above that rejected A$34.50/share bid.”
The confirmation by Caltex of the approaches points to a further shake-up in the sector, which is already in a state of upheaval following Chevron’s surprise $425 million purchase of Puma Energy’s Australian network in December. Chevron will also take back the Caltex brand from Caltex Australia, which will rebrand to Ampol over the next three years.
Also still up in the air is the sale process under way for ExxonMobil’s downstream business in Australia, including its Altona refinery, which is understood to have attracted a range of bidders that could also include Chevron.
Mr Samter said it was “almost unfathomable” that Chevron would stop at 3 per cent – the market share of Puma – after re-entering a developed and fairly small market.
“Big oil moves slowly, so whether Caltex Australia was, or can quickly come, on their radar, given the time constraints, is a fair question,” he wrote.
“The probability that they make a further move in the country looks highly likely though.”
EG, owned by billionaires Zuber and Mohsin Issa and backed by TDR Capital, is said to have hired Jefferies as its advisor on its Caltex play. EG’s Australian business is run in Australia by Mike McMenamin, a former long-term Caltex executive who later headed up the sale process for the fuels business at Woolworths.
A challenging market
Airlie Funds Management’s Terry Couper said that Chevron buying Puma and now multiple parties identified as interested in Caltex highlights how difficult it is to enter the market organically.
“This reinforces the privileged nature of the Caltex integrated assets – they can’t be replicated, only bought,” he said.
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, neither of which own refineries in their global portfolios, 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 he expected those could be addressed by a requirement by the competition watchdog to divest individual sites.
However, Mr Samter said an EG acquisition of Caltex’s retail business would need “an enormous amount of divestments” to resolve competition issues.
“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 its statement.
It added it had not received any proposal to acquire its business since Couche-Tard’s offer, which it disclosed on November 26, a day after announcing plans for a spin-off of a 49 per cent stake in 250 key retail sites.
“There is no certainty that any binding proposal will be made by any of the parties who have expressed potential interest,” it added.
Caltex and Couche-Tard are expected shortly to hammer out confidentiality agreements and logistics for a presentation to take place by Caltex senior management to their counterparts at Couche-Tard.