Canadian suitor scraps $8b offers over virus, oil price
The collapsing world economy, thanks to coronavirus and the plummeting price of oil, have ended an $8b, six-month takeover tilt of Caltex Australia by a Canadian company.
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The biggest takeover deal underway in Australia has collapsed as the coronavirus pandemic up-ends the global economy and the oil price rout continues.
Caltex Australia shares tumbled Monday after the fuel refinery and retailing group revealed its suitor, Alimentation Couche-Tard, had walked away.
The Canadian convenience store group decided not to proceed with the $8.8 billion buyout because of the uncertain economic outlook, Caltex said in a statement.
It comes as oil prices keep sliding dramatically amid a slump in demand. US crude oil prices, already languishing, tumbled again early Monday to their lowest levels since 1999 — below $US15 a barrel.
That development came amid reports the world was fast running out of oil storage space despite a historic agreement struck early last week by major producers to cut output.
The Organisation of Petroleum Exporting Countries and key allies announced they would reduce production by 9.7 million barrels a day in May and June in the biggest such cut ever agreed to.
In its statement on Monday, Caltex did not cite the slide in oil prices as a key factor in Couche-Tard’s decision.
But it said its suitor had opted against the buyout “due to the high level of economic uncertainty caused by the COVID-19 pandemic”.
Couche-Tard had “communicated an intention” to resume takeover talks when there was more clarity about the global outlook, Caltex said.
The Canadian group had “confirmed it is able to secure financing, but given the COVID-19 pandemic believes it would be prudent to seek to re-engage once there is sufficient clarity as to the global economic outlook”, it said.
Caltex, led by interim chief Matthew Halliday, noted there was “no certainty” Couche-Tard would revisit the deal.
In a separate trading update, the group said demand for petrol at its Australian outlets had slumped by almost half in recent weeks.
Earlier this month, Caltex said it had “started to observe” a fall in demand for petrol of 30 per cent to 50 per cent — compared with sales volumes last year — amid the social restrictions rolled out to help contain the virus. Demand for diesel looked to have fallen 10 per cent to 30 per cent, the group had said.
It now says the fall in demand is approaching “the upper end” of those ranges.
Following the revelations on Monday, Caltex shares tumbled 7.8 per cent, or $1.84, to $21.72 — still substantially above the $19 trough they hit last month.
Couche-Tard had been pursuing Caltex for the best part of six months, lobbing three bids.
The first two were rejected by Caltex and the third, tabled in February at $35.25 a share, paved the way for the Australian group to open its books for scrutiny by its suitor.
But the coronavirus spread rapidly around the word over the following weeks and Caltex shares plunged more than 40 per cent, signalling the market’s expectation a deal was unlikely to go ahead.
Mr Halliday on Monday said that in the prevailing market, it had ultimately been too challenging for the companies to agree to a deal that would take months to wrap up.
The COVID-19 pandemic had created uncertainty “for the whole world in terms of how to value something and how you manage through a long completion period even if you then manage to get a transaction to go forward in a world like this,” he said.
British group Euro Garages, which already owns Woolworths’ petrol stations in Australia, had also bid for Caltex in recent months but the proposal was rejected as undervaluing the company.
Caltex will now focus on previously announced plans to rebrand its petrol stations as Ampol and to sell 250 of its sites or spin them into a separate company.
with THE AUSTRALIAN
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