Ampol makes $2b takeover bid to form trans-Tasman fuels giant

Top Australian fuel supplier Ampol has launched a $2 billion offer to buy New Zealand’s Z Energy and form a trans-Tasman industry giant with greater scale to navigate the dawn of the electric vehicle era and shift to clean energy.

Wellington-based Z Energy, the nation’s largest petrol and diesel retailer with more than 300 service stations, on Monday said it would open its books to Ampol exclusively for four weeks after receiving the buyout offer of $NZ3.78 a share.

The offer follows three confidential approaches by Ampol since early June, which Z Energy rejected.

Shares in Z energy climbed 14 per cent on Monday and Ampol fell 4 per cent. Z Energy’s board is yet to decide on whether it will recommend shareholders support or reject the bid.

Ampol managing director Matt Halliday said the Z Energy acquisition presented a “logical growth opportunity” with greater regional scale at an important time. Combining the companies would provide a larger platform to test and roll out lower-emissions energy solutions such as ultra-fast electric-car charging sites, biofuels and clean hydrogen supply.

“A successful acquisition would create an Australia-NZ leader in fuel, with significant regional scale and trusted and iconic brands on both sides of the Tasman,” Mr Halliday said.

However, Z Energy chief executive Mike Bennetts said he expected Ampol’s offer to be a catalyst for other bidders that had previously signalled interest in the company to come forward with higher offers.

In order for Ampol to buy Z Energy, it may need to sell its existing Gull fuel station network in New Zealand because of competition concerns.

“There have been others that have shown interest in Z from time to time, and they may see this as the catalyst to put a bit more oomph behind that interest,” Mr Bennetts told The Age and the Herald.

“Someone else may not have the issues around the divestment that Ampol may have, and they might be able to offer a better price as a result.”

While Ampol indicated it would divest if necessary, Mr Bennett said Gull’s buyer would also require approval under New Zealand law, and may cause further delays.

MST Marquee analyst Mark Samter said he believed Z Energy had been “horribly underpriced” by the equity market and there could be a long list of potential bidders including Chevron, Vitol, Glencore, Trafigura and Japanese refiners.

“I don’t think we can rule out interlopers,” he said. “Time will tell.”

Mr Samter said he thought Z Energy had been “horribly underpriced” and misunderstood by the equity market

News of the bid comes as Ampol reported it had returned to profit in the six months to June 30.

Ampol, like fuel retailers everywhere, was hard-hit in 2020 amid COVID-19 restrictions keeping people indoors, cars parked in driveways and planes grounded.

Demand and sales began turning around this year, with Ampol’s bottom-line half-year profit rising to $325 million, up from a $626 million loss, the company reported on Monday.

However, Mr Halliday said the reimposition of lockdowns across large parts of Australia in recent months are again taking a toll.

“As we work through the impact of current lockdowns, the first half has shown demand and sales recover quickly when restrictions lift,” he said. “This underscores the importance of an ongoing successful rollout of the vaccine program, so the nation can focus on economic recovery.”

Spiralling losses last year prompted Ampol to launch a review into the future of its Lytton oil refinery in Brisbane, which employs 550 people, and consider shutting it down for good.

Two other oil refineries — ExxonMobil’s Altona plant and BP’s in Perth — both closed their doors last year amid the unprecedented collapse in demand for petrol, diesel and jet fuel. But after reaching a rescue deal with the Morrison government, Ampol and rival refiner Viva Energy have since agreed to keep Australia’s two remaining refineries open until at least mid-2027.

The board declared a fully franked interim dividend of 52¢ a share to be paid on September 23.

Extracted from The Sydney Morning Herald

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