Caltex, Couche-Tard standoff delays deal

Expectations are fading of progress before Christmas towards a renewed approach for Caltex by its suitor Alimentation Couche-Tard as the two parties haggle over the terms for access to commercial information by the target.

The Australian petrol and diesel supplier is understood to be looking to limit the additional information it supplies to Couche-Tard just to a presentation to senior management, well short of the full due diligence requested by its bidder.

The stand-off has meant only slow progress is being made towards putting in place the confidentiality agreements that would allow any non-public information to be made available to Couche-Tard, whose proposed $8.6 billion cash takeover offer has been rejected by Caltex’s board.

The process between the two sets of advisers has also been interrupted by Caltex’s investor briefing day on December 5, although that is understood to have revealed little to alter Couche-Tard’s view that its proposed $34.50-a-share cash offer presents compelling value for shareholders.

Shares in Caltex have hovered around or slightly below that price since Couche-Tard’s appetite for the Australian fuels retailer was confirmed by the target on November 26. They edged up 16ยข on Wednesday to $34.51.

Caltex says its key institutional investors support the stance it is taking towards Couche-Tard’s approach, believing a higher price is warranted.

But dissenting investor Merlon Capital Partners, which has told Caltex’s board it is concerned that Couche-Tard is not being provided a reasonable opportunity to engage on its offer, maintains it has held discussions with a number of larger shareholders who share its views.

Meanwhile, observers continue to voice doubts that Couche-Tard, which owns a network of over 16,000 convenience stores but no refinery or fuel distribution network, intends to keep Caltex’s Lytton refinery in Brisbane despite the Canadian player’s chief executive Brian Hannasch declaring it is a committed buyer of the whole company.

FACTS Global Energy chairman Fedeirun Fesharaki, who closely follows the industry, said he expected the refinery may be closed if Couche-Tard buys Caltex, particularly given a weak outlook for refining and looming investment required at the plant to meet stricter fuel standards coming into effect in 2027.

But growing public and political concern around Australia’s fuel supply security suggests the future of the refinery – one of only four remaining in Australia – will be a key topic of discussion if a takeover deal is reached.

Sources suggest the issue will be front of mind for the Foreign Investment Review Board, whose consent is needed before Couche-Tard can buy Caltex.

Sources suggest the refinery’s key position in local petrol and diesel supply will see it classified as critical infrastructure warranting heavier scrutiny by FIRB.

Meanwhile, FACTS Global Energy pointed to a weak end-of-year for refiners after margins slumped in all regions due to stronger crude oil prices after the “OPEC+” agreement in early December to limit supply together with “insipid” demand amid generally mild winter weather in key OECD countries.

Expectations that the introduction of stricter sulfur standards for marine fuel on January 1 would deliver a boost to margins have so far largely failed to materialise.


Extracted from AFR

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