Ampol’s $NZ2bn (($1.9bn)) buyout proposal for Z Energy is showing positive signs when it comes to gaining approval from the target, with its chief executive Michael Bennetts talking up the merits of a tie-up this week.
DataRoom understands that Z Energy’s boss, Mr Bennetts, briefed some investors on Wednesday, explaining that a tie-up with Ampol would have major synergies, create opportunities to expand into new geographies and de-risk the business through diversification.
Ampol announced its buyout proposal for Z Energy on August 23 and was granted four weeks’ exclusive due diligence, although Z Energy did not recommend the transaction.
Most take the positive comments about the potential transaction as a sign that Z Energy will likely approve Ampol’s $NZ3.78 per share offer, or one that is slightly higher.
Some are curious to see whether Z Energy chairman Abby Foote or Mr Bennetts end up with a boardroom seat at Ampol following any transaction.
Z Energy shares closed down 1c to $3.38 while Ampol’s shares closed 0.73c lower to $26.99.
Z Energy operates 133 service station sites in New Zealand with the Caltex brand and 197 carrying the brand of Z Energy. Ampol owns 106 Gull sites across the Tasman.
The upside for Ampol is the recent closure of New Zealand’s only oil refinery at Marsden Point in Northland, which can provide it with an earnings stream by selling fuel into New Zealand for Z Energy’s fuel retail network.
It will be interesting to gauge the response of Ampol shareholders should a deal proceed, with some recently disappointed about not being offered a capital return they had been expecting at about $29 per share.
Ampol is working with Macquarie Group and law firm Bell Gully for its proposal, which was well flagged by DataRoom and which followed three earlier offers at $3.35, $3.50 and $3.60 per share. Z Energy is working with Goldman Sachs and Chapman Tripp.
The Ampol offer may include scrip and a secondary New Zealand listing, although this option is not said to be popular with Z Energy investors, and Ampol would raise $600m to fund the transaction or pay the scrip to shareholders.
Ampol’s offer was a 22 per cent premium to Z Energy’s last close on August 12, the day before it received the proposal.
It has been accepted by both Ampol and Z Energy that to appease the New Zealand Commerce Commission, Ampol’s $NZ600m Gull chain will likely need to be offloaded should they agree on a transaction.
Ampol owns a Singapore trading hub, sourcing crude oil and refined products. Some investors believe Ampol’s management can improve Z Energy’s performance.
Ampol, an Australian-listed retail fuels and distribution business that was previously called Caltex Australia, reported a $325.5m half year net profit last month, rebounding from a loss in the previous corresponding half.
Fuel volumes have been 35 to 40 per cent lower than from before the global Covid-19 pandemic and Ampol had also suffered from weaker shop sales.
Some analysts believe Z Energy has been underpriced and misunderstood by the equity market and estimate that Ampol could achieve supply chain synergies worth at least $NZ70m per annum for a transaction.
Macquarie analysts say Ampol’s market position in Australian fuels is near saturation point and it has already expanded internationally.
Extracted from The Australian