Takeover target Caltex Australia will fork out $165 million to rebrand itself as Ampol following the breakdown of a licensing agreement with US oil giant Chevron.
The ASX-listed company announced on Monday it be revitalising the 83-year-old petrol company following Chevron’s termination of a longstanding agreement for Caltex Australia to use its ‘Caltex’ brand, which it owns and licenses to operators around the world.
The name change comes at a tumultuous time for the local fuel and service station giant, which is currently waiting on a fresh takeover offer from Canadian convenience store operator Couche-Tard after Caltex Australia said its initial $8.6 billion bid was “undervalued”.
It’s also in the midst of a $1.1 billion spin-off of a 50 per cent stake in 250 of its service stations across the country, with plans to create an ASX-listed property trust.
Chief executive Julian Segal told The Age and The Sydney Morning Herald the Ampol rebrand would have no impact on any prospective bid from Couche-Tard, saying there was “no connection between the two”.
Mr Segal and company chief financial officer Matthew Halliday also said there was no update on the process of the Couche-Tard offer, with Caltex Australia currently preparing non-public information memorandum to better inform a fresh offer from the suitor.
Chevron, a former major shareholder in Caltex, notified the company of the licensing agreement’s termination last Friday following 18 months of negotiation.
Mr Segal said the company had been prepared for the termination ever since Chevron’s sold its 50 per cent stake in Caltex Australia four years ago for $4.62 billion.
“We’ve been working on this since 2015 … we’ve had a period of time to prepare ourselves for independence,” he said. “Now we can act as one and chart our own destiny.”
Ampol was a historic Australian fuel business, founded in 1936 and originally known as the Australian Motorists Petrol Company. It was acquired by concrete seller Pioneer in 1988 before merging with Caltex Australia in 1995.
Caltex Australia had already been using the Ampol brand internationally at some of its Asian locations, and while the chief executive admitted the brand was less well-known amongst younger Australians, it had a “tremendous recollection” with older customers.
Chevron did not indicate why it revoked Caltex Australia’s licensing, but it’s likely the US company intends to use the brand for its recent $425 million take over of Puma Energy’s fuel and service station business, which includes 360 petrol stations.
Caltex Australia will retain rights to the name for the following three years, during which it will begin a transition to Ampol across its network, which it estimates will cost a total of $165 million.
Mr Segal says those costs are likely to reduce, as the fuel retailer takes advantage of already planned site refreshes to roll-out the new branding.
The company has also flagged between $18 to $20 million in annual cost savings due to the removal of annual trademark license fees it paid to Chevron.
Caltex hopes the return of an Australian brand to the country’s fuel market may provide a much-needed boost to fuel volumes for the retailer as customers choose to shop local.
“We see a very big opportunity to bring back an iconic Australian brand in a market where all the other major fuel brands are foreign,” Mr Halliday said.
Anton du Preez, fund manager at Caltex shareholder Pengana Capital, said he didn’t expect the rebrand to affect the company’s goodwill with consumers in any meaningful way and pointed to the cutting of licensing fees as a positive.
“I don’t think there’s really a negative for this, it’s always better to control your own destiny. In my view it’s pretty much business as usual,” he said.
Caltex Australia shareholders will be asked to approve the name change at the company’s annual general meeting in May next year. Company shares closed down 0.09 per cent at $34.14.
extracted from SMH