EG may focus on Caltex as US hopes fade

EG Group may prioritise winning a takeover battle for Caltex amid signs a $20bn-plus bid for a US fuel chain may fail.

Britain’s EG Group may prioritise winning a takeover battle for Australian convenience retailer Caltex amid signs interest by its private equity owners in a $20bn-plus bid for US petrol station chain Speedway may lose out to Japan’s 7-Eleven.

EG entered the frame for Caltex last week after lobbing a cash and share takeover offer for Caltex that puts it in competition with an $8.8bn cash offer from Canada’s Alimentation Couche-Tard.

After granting due diligence to Couche-Tard on February 17, Caltex’s board led by chairman Steven Gregg is still weighing whether to open its books to EG, with some uncertainty given the different structure and pricing assumptions contained within its offer.

A decision is expected early this week with Caltex’s annual results due on Tuesday.

One factor which may influence EG’s financial firepower, should a bidding battle ensue for Caltex, is a blockbuster buyout process in play for Marathon Petroleum’s 4000 Speedway convenience sites in the US.

One of EG’s main investors, TDR Capital, was interested in merging Speedway with the British petrol station operator in a mooted $US26bn ($39bn) deal, Bloomberg News said.

However, the Japanese convenience store that controls 7-Eleven is now in exclusive talks for the Speedway deal, according to reports, with a potential deal to be announced this week.

As it stands, the Caltex deal would represent the largest ever acquisition for EG. The company has grown rapidly in Europe, the US and Australia, building a network of about 5000 fuel stations and retail stores in a series of debt-fuelled acquisitions capped by last year’s $1.7bn deal for Woolworths’ network of 540 petrol ­stations.

After starting in 2001 with a single convenience site in Manchester, Euro Garages has quickly grown into one of the world’s largest independent operators.

The EG Group brand was created in 2016 when Britain’s billionaire Issa brothers, Mohsin and Zuber, merged their Euro Garages business with TDR’s European Forecast Retail unit.

EG had initially considered teaming up with financial powerhouse Macquarie for its Caltex tilt, framed around the idea EG would buy the Australian operator’s 2000 convenience sites with the bank scooping up the fuel and infrastructure assets.

The two were close to agreeing consortium terms, but Caltex’s decision to grant full due diligence to Couche-Tard effectively fired the starting gun for any rival parties considering a bid.

EG joined the takeover process on February 17 by offering $3.9bn in cash for Caltex’s convenience retail business and giving shareholders a stake in an ASX-listed Ampol fuel business.

Caltex has rejected two bids from Couche-Tard: an initial proposal of $32 a share in October and a bump to $34.50 in late November.

The Canadian convenience store giant then lobbed a “best and final price” of $35.25 a share on February 13 in a deal worth $8.8bn, but left the door open to a higher offer if rivals emerged.