Competition heats up for Caltex

A Caltex servo.

Caltex’s stock price has risen some 50 per cent since its August lows and at $35.63 is above the indicative $34.50 price on the table from Canada-based takeover bidder Alimentation Couche-Tard.

In the next day Caltex is expected to confirm Couche-Tard has accepted confidentiality and standstill agreements sought by its potential target, opening the door to a selective management briefing in Sydney on Thursday to learn more about the business.

The agreement was not signed at lunchtime on Wednesday but given Couche-Tard chief Brian Hannasch is in town along with his finance boss and other senior executives it would seem the Canadian retail and fuel store giant is looking hard at the potential $8.6 billion takeover.

When it is signed Caltex will tell the market.

The Caltex talks, which may well include Couche-Tard founder Alain Bouchard, will run over two days.

The Couche-Tard team is, naturally enough, playing down a higher price.

It comes after Caltex last week said it had fielded multiple approaches for all or some of its assets, including one from Britain’s EG Group.

Ironically enough back in March 2015 Chevron sold out of Caltex at $34.20 a share - a 10 per cent discount to the then market price of $37.88 a share.

Chevron is now keen on building its Australian retail power as Asia’s supply excesses build.

China is under pressure to increase its export quotas and as it does that there will be more supply looking for a home, which explains why Chevron acquired Puma in Australia late last year.

It is a wildcard in the Caltex battle.

A known bidder is EG Group, which in November 2018 paid $1.7 billion for 540 Woolworths petrol stations, which accounted for some 13 per cent of the Australian market.

EG has hired Gilbert & Tobin’s competition ace Gina Cass-Gottlieb to help present a case which would allow it to also buy the market-leading Caltex sites.

At first glance, given BP was knocked back in 2017 from buying the Woolworths sites, one would think EG had no chance of buying Caltex.

At the time Woolworths was a price discounter, given fuel was a way of getting people to buy more at its supermarkets.

BP was a price leader so that, combined with multiple geographic overlaps, killed the proposed deal.

As EG is primarily a convenience retailer it too would be a discounter so the first objection would be absent, but the geographic overlaps are many.

Suffice it to say Cass-Gottlieb could craft a deal to get ACCC clearance.

The fact she is in the room tells you EG is keen, but until it says so publicly the ACCC has yet to formally notify an investigation which is well and truly underway.

All this means Couche-Tard has plenty of potential competition and Caltex chair Steven Gregg plenty to confidence to play hardball in the talks over the next couple of days.