Ampol fuels up for a 7-Eleven pursuit

Ampol’s net debt is $2.9bn against a $7.6bn market value. Picture: Toby Zerna

The $7.6bn fuel refiner and distributor Ampol is entering the competition to buy $2bn convenience retailer 7-Eleven, as the sales process ramps up.

Ampol has previously faced opposition from the Australian Competition & Consumer Commission over a deal to buy Mobil sites about a decade ago.

Most of the major private equity firms aside from Brookfield are expected to take a look at 7-Eleven.

But a strategic player is considered more likely.

Ampol’s balance sheet in good shape: its net debt is $2.9bn against a $7.6bn market value.

This means it’s ready for more deals, and it has won the trust of the market with the success of its $NZ2bn Z Energy purchase.

Some also consider it underweight in fuel convenience and say the ACCC will not be a major obstacle this time.

Ampol is known to be close to Macquarie Capital.

Some think a better target for Ampol would be the EG business in Australia, because 7-Eleven locked in a 15-year fuel supply deal with ExxonMobil last year.

Speculation was mounting in 2021 that global petrol station and fast-food outlet owner EG was considering an initial public offering of its $1.7bn Australian unit on the ASX, so a sale isn’t out of the question.

This week, Asda announced it was buying EG’s British and Irish business for £2.27bn ($4.34bn), which could be the catalyst for a sale of the Australia operations.

Both Asda and EG were owned by Zuber and Mohsin Issa and private equity group TDR Capital. Two years ago, the British company, which operates in Europe, the US and Australia, was keen to reduce its debt after an aggressive acquisition spree over four years that took its global portfolio to more than 6000 sites.

Barrenjoey was understood to be close to a potential deal at the time, given partner Barclays was close to EG as it considered strategic options.

At that time, Ampol was believed to be prepared to take a look at the business, but sources believed that it would only pay an opportunistic price and could face opposition from the ACCC.

EG fought off competition to buy a portfolio of 540 fuel convenience sites from Woolworths five years ago for $1.7bn. Investment bank Citi advised EG on the deal.

Some say the underbidders were far below EG in price and it may have paid too much.

Service stations are expected to remain important for the distribution of clean fuels such as hydrogen.

EG lobbed a bid for Ampol in early 2020. It proposed to pay $3.9bn in cash for Ampol’s convenience retail business, with the fuel and infrastructure division to be listed. However, the proposal was rebuffed.

Working for EG that time around were investment banks Jefferies, Bank of America and Citi.

7-Eleven is on a high, generating annual earnings before interest, tax, depreciation and amortisation of about $220m.

It is up for sale through Azure Capital on behalf of the Withers and Barlow families.