Takeover target Z Energy wants Australia’s Ampol to pick up regulatory risk associated with its $3 billion bid, by guaranteeing dividends flow to its shareholders while the mooted deal completes.
As Ampol enters the final week of its four-week exclusive due diligence program, it is understood Z Energy’s future dividend payments have emerged as a key battleground.
Z Energy, worried that it may take Ampol six to 12 months to get the required regulatory approvals and complete the transaction, would like to see Ampol’s offer leave room for any dividends declared during that period to flow to Z Energy investors without impacting the offer price.
Ampol, which has a more favourable view of the regulatory hurdles, is understood to be considering its position.
Sources said was discussed in the past week, as the Kiwi fuel retailer’s chair Abby Foote and chief executive officer Mike Bennetts met institutional investors to gauge their thoughts on the potential transaction.
Z Energy has said it expects to pay NZ19¢ to NZ23¢ a share in dividends in the upcoming financial year. Shareholders reckon they could see about half in November, when the group would usually declare and pay its interim dividend. The full year dividend is normally paid in May.
Ampol would likely argue its $NZ3.78 a share offer – its fourth proposal with earlier confidential bids or verbal offers at $NZ3.35, $NZ3.50 and $NZ3.60 according to Z Energy’s version of events – factors in things like dividends, the regulatory review process and potential delays. It’s also thought to have a more positive outlook on the regulatory review.
The regulatory review includes approval from both NZ Commerce Commission and NZ Overseas Investment Office reviews – the former of which may require Caltex to divest some or all of its existing Kiwi fuel retailer, Gull.
MST Marquee analyst Mark Samter told clients last week the two companies should just meet in the middle and split the dividends. He said it would cost both sides $NZ15 million to $NZ20 million.
The situation is expected to come to a head in the coming week or so. Z Energy shareholders are understood to have told Foote and Bennetts that they’re keen on the transaction, although they obviously want the duo to extract the best terms possible.
Last week’s meetings came just days prior to Z Energy confirming FY22 guidance, including the dividend forecast. Analysts said the guidance was maintained thanks to hedging gains in its NZ Emissions Trading Scheme (ETS) position.
Z Energy has Goldman Sachs and law firm Chapman Tripp in its corner, while Macquarie Capital tends to Ampol.
Extracted from AFR