Caltex Australia, the target of a $8.6 billion takeover bid from a Canadian suitor, has announced plans to sell 25 high-value petrol station sites for about $136 million and raise as much as $500 million through the sale of hybrid securities as it presents an alternative future for the company to investors.
Chief executive Julian Segal said the sale of the sites, which would be followed by the divestment of a second tranche of 25 sites starting in early 2020, is the result of a review of the fuel supplier’s retail network and would allow Caltex to focus on the sites best aligned with its convenience retail strategy.
It would also release capital for alternative uses, including a buyback of shares that would release some of Caltex’s $834 million of franking credits, a key factor in the takeover approach by Alimentation Couche-Tard.
“The proceeds will create additional balance sheet capacity which will allow us to explore capital management opportunities in line with our capital allocation framework,” Mr Segal said ahead of an investor briefing in Sydney, where the bid from Quebec-based Couche-Tard is expected to be the key topic of interest.
The sale of hybrid securities, raising between $300 million and $500 million, would diversify Caltex’s funding sources, strengthen the balance sheet and increase financial flexibility, the company said. It would not take place if Caltex is sold.
Addressing the investor briefing, chairman Steven Gregg said the moves were “all part of capital management and the realisation of value for shareholders, and it’s in direct response to a lot of the feedback we have been getting.”
If they are going to buy Caltex they need to pay a proper price for it. — Chairman Steven Gregg
Referring to the takeover approach from Couche-Tard, Mr Gregg restated that Caltex rejected its $34.50 a share offer earlier this week but was seeking to engage further. Caltex has yet to hear back from Couche-Tard on its offer of access to selected non-public information on its accounts to firm up a higher offer.
“We are not going to leave value on the table,” he said.
“If they are going to buy Caltex they need to pay a proper price for it.”
Couche-Tard had been seeking full due diligence to scour Caltex’s accounts, as well as a period of exclusivity on negotiations, which Caltex has rejected.
Explaining the work under way to release value in Caltex, Chief financial officer Matt Halliday outlined initiatives under way that would deliver $195 million of earnings uplift by 2024, including a further $40 million in cost reductions, $70 million of growth opportunities in the fuels & infrastructure business and $85 million from the convenience retail strategy.
Caltex announced plans early last week, immediately before the Couche-Tard approach was revealed, for an initial public offer of property sites that would also
Mr Gregg also updated investors on the search for a successor to Mr Segal who announced his intention to retire in August. He said a shortlist of external candidates were in the running, as well as one “extremely qualified” internal candidate, executive general manager fuels & infrastructure, Louise Warner.
Shares in Caltex were down 0.7 per cent in early trading at $34.505.
Extracted from AFR