Bid puts Caltex assets in spotlight

A Caltex service station.

As Caltex directors continue to assess whether to accept the $8.6bn takeover bid from Couche-Tard, questions remain as to what parties the Canadian group may talk to about a potential sale of the target’s infrastructure assets.

One possibility being touted is that Couche-Tard and Brookfield could join forces.

Both companies, are, after all, Canadian, and it is well known that Couche-Tard wants the retail operations of Caltex rather than the infrastructure assets.

Brookfield, meanwhile, has had a voracious appetite for deals in Australia and the assets associated with the Lytton oil refinery in Brisbane and Kurnell fuel import terminal in Sydney could be a good fit for the buyout fund, which has not offered comment on its level of interest in Caltex.

What will be interesting to watch, should a future infrastructure transaction take place, is whether a buyer would agree to a purchase without a take or pay contract, or whether Couche-Tard would agree to a take or pay contract.

Most infrastructure investors would rely on a steady income from the asset and this would be a condition of purchase.

The wholesale fuel business is thought to be worth about $2bn, while the related infrastructure is worth hundreds of millions of dollars, according to analysts.

For Couche-Tard, the acquisition is considered strategic in that it believes it can boost earnings of Caltex across the retail network through its operational expertise and use the acquisition to expand further through Asia. The thinking is that it would not want to commit to a fixed long-term charge.

As reported by this column earlier, it is understood that a private equity firm was working on a plan to bring together the South Australian-based fuel retailer Peregrine Corp, which operates the On the Run convenience stores, and Caltex, and the understanding among some is that the company involved with the plan may have been Brookfield.

The offer price being discussed for Caltex was around $30 a share. However, it fell apart after it could not convince Peregrine to sell. Other parties said to have taken a look at Caltex are The Carlyle Group, Kohlberg Kravis Roberts, BGH Capital and Blackstone.

Couche-Tard made its first offer for Caltex on October 11 at $32 per share before coming back with a higher bid at $34.50

Expectations are that the board would require Couche-Tard to lift its offer by about 50c to $1 before accepting the deal.

Couche-Tard has been working with Goldman Sachs for about a year on a buyout plan for Caltex, which is advised by Grant Samuel and UBS. It was one of the bidders for the Woolworths petrol station portfolio that sold to the EG Group last year.