Caltex board’s rejection of Couche-Tard offer seems like a canny move


It is noteworthy that on news of interest from a second party, Caltex’s share price traded above Couche-Tard’s indicative offer price of $34.50 for the first time in a month, closing at ?????

The Caltex board had already branded $34.50 insufficient to recommend to shareholders.

Its rejection of the Couche-Tard offer last month was seen as controversial in some quarters. But less so today. Now it seems like a canny move.

While news of a potential fresh bidder hit the headlines in Australia on Tuesday it is understood that EG has been working on a deal since December. Caltex is understood to have been aware of EG but that no offer had been made to the Australian company.

EG is no stranger to the Australian market. A year ago it acquired a portfolio of 540 petrol stations from Woolworths for $1.7 billion. It is described as an aggressive player in this market with a portfolio of assets throughout Europe and North America under the Esso and Euro Garages brands.

It has a long history of consolidating petrol stations and convenience store assets.

It also has form as a rival to Couche-Tard. Indeed Couche-Tard was the under bidder on the Woolworths petrol stations.

EG’s ownership of these 540 Australian petrol outlets, however, may present it with an Australian Competition and Consumer issue which could require some divestment.

Acquiring Caltex would bring a network of about 2000 sites across Australia.

It is also not clear whether EG, a private company, is ready to make an acquisition at this time – given talk that it is preparing for an IPO this year.

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EG’s other handicap is that it entered the Caltex arena later than Couche-Tard which has already been given access -albeit limited – to the company’s books.

It is understood Couche-Tard’s advisers have been undertaking due diligence over Christmas and New Year.

But for the many fund managers that have been waiting to secure a decent return on their investment in Caltex the prospect of a second interest party would be viewed as a welcome turn of events.

Investors had been divided on whether the Caltex board should have recommended the $34.50 indicative offer from Couche-Tard.

Of those willing to hold out for a better deal some had suggested $36 would receive their support. Others were looking for a number closer to $38.

At this stage there is no guarantee that EG will front with an offer but its presence in the background must surely spur Couche-Tard to work a little harder.

Outgoing CEO of Caltex, Julian Segal,Credit:Dominic Lorrimer

Until now Couche-Tard has effectively been bidding against itself.

Back in October the Canadian convenience store giant sounded out the board at $32 a share, a price that was roundly rejected as cheap. This offer was made only a couple of months after Caltex announced its long-serving chief executive Julian Segal would be moving on.

In November, armed with the knowledge that a predator was circling, Caltex announced the spin-off of its 250 freehold property sites that house its petrol stations. It also provided an update to the market on Caltex’s improved refiner margins.

It was a classic play designed to have the share price better reflect the value of the assets inside the business.

There is no doubt that the takeover interest combined with Caltex’s own plans to improve its corporate structure and investment returns have bolstered the company’s share price from its lows of around $23.40 mid last year.

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