Hopes of Ampol buying EG’s Australian service stations fade

It is understood that Ampol looked at EG Group’s Australian operation but is likely to walk away. Picture: David Clark

Expectations that Ampol will buy EG Group’s portfolio of Australian services stations are fading with reports circling that the target is in terrible shape.

Sources say that the global EG Group has used funds to pay down debt and has severely underinvested in the business.

It is understood that Ampol had looked at EG Group’s Australian operation but based on the latest discussion, it’s likely to walk away.

Ampol also recently experienced a decline in its share price, after earlier the thinking was that it could use the strength of its share price to tap the market to fund the deal.

Complicating matters for Ampol is that it would probably need to sell some service stations to appease the competition regulator if it purchased the EG Group’s assets.

DataRoom reported in 2021 that EG Group was considering an initial public offering on the ASX.

At that time 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 had taken its global portfolio to more than 6000 sites.

Then, Ampol was believed to be prepared to take a look at the business, but observers believed it would only pay an opportunistic price.

EG Group’s Australia assets are the portfolio of 540 fuel convenience sites that it bought from Woolworths in 2018 for what was considered an aggressive price of $1.7bn.

EG Group itself lobbed a $3.9bn bid for the Ampol convenience retail business early in 2020, but that was rejected.

Its earnings before interest, tax, depreciation and amortisation last year fell 7 per cent to $US1.1bn on the back of oil volatility and stronger fuel performance in the prior year as it embarked on asset sales and focused on deleveraging the balance sheet.

EG was founded in 2001 by brothers Mohsin and Zuber Issa.

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