Caltex chief Halliday under the pump but calm

Matt Halliday has a good poker face. The new Caltex boss has a work pile-up that would test the most seasoned chief executives.

Caltex chief Matt Halliday. Picture: John Feder.

Matt Halliday has a good poker face. The new Caltex boss has a work pile-up that would test some of Australia’s most seasoned chief executives.

Two competing foreign takeover bids, the exit of long-serving leader Julian Segal, escalating threats from the coronavirus, volatile global oil prices and pressure from long-serving shareholders to deliver on its mooted $1bn property spin-off.

Despite only joining the fuels retailer 10 months ago as chief financial officer, the former Rio Tinto executive was parachuted in last week to replace Segal on an interim basis. But if the 43-year-old Halliday is feeling the pressure, he’s certainly not letting it show.

He attributes his focus to two decades of experience working for mining giant Rio Tinto.

Finance and commercial roles gave him a front-row seat working on some of the miner’s most critical challenges: forming the joint venture with China’s top steelmaker Baosteel in the early 2000s; defending Rio against a blockbuster BHP takeover in 2008; preparing for the miner’s staged exit from coal in Australia and, most recently, boosting its historically troubled Canadian aluminium business.

“There was a very strong focus at Rio on capital allocation, driving a returns mindset, and making sure you were always very disciplined about the decisions you take, including making very hard decisions around the portfolio,” Halliday tells The Australian.

“When I looked at the Caltex opportunity, I saw a lot of similarities between the companies and I felt I could make an impact. I think the pathway has been there for Caltex but execution was the problem. There was some frustration there from investors.”

Halliday credits much of his growth in the last half of his career with Rio to his mentor Chris Lynch, the former BHP executive and Transurban boss who joined Rio’s board in 2011 and became finance chief two years later.

When Rio offered Halliday the CFO role at its Alcan unit in Montreal, it was Lynch who brought him in for a pep talk and suggested he grab the opportunity.

“He had a very strong view that a global perspective has real value,” Halliday recalls. “He lived that through his own career and he was pushing me on that quite strongly. He’d spent some time in Pittsburgh with Alcoa at one point and said ‘if you want to go and see a tough industry, go and spend some time in that part of the world in the aluminium industry’.”

Halliday did just that and says working within what he regards as Rio’s most complex business gave him valuable experience in understanding supply chains and getting the most out of an industry.

Lynch, now retired since leaving Rio 18 months ago, says he recognised early on that Halliday had the business nous to reach the top.

“He was always a guy that was a very, very clear thinker with a strategic brain and a really good ability to clarify issues and figure out what were the important levers to get control of,” Lynch tells The Australian. “He did a good job on rationalising the coal business, was very strong on transactions and then at Alcan did a lot of critical work on what parts of that business made sense. I was hoping he would stay at Rio and end up running a business or becoming the group CFO. Clearly I can understand why he would be attractive to Caltex at this point in time.” Lynch left Rio with an unmistakably strong balance sheet and Halliday said that capital discipline was a big lesson.

“Chris always used to frame it as ‘measure yourself against the returns you can deliver and against what else you can do with that capital’. That stayed with me.”

Halliday got to work last year, with the Rio lessons fresh in his mind, as he sought to free up value on Caltex’s balance sheet through a $1bn spin-off of its petrol sites.

Some of its institutional investors had been agitating for Caltex to unlock value in its portfolio, which spans the Lytton refinery in Sydney, import terminals and 800 retail sites serving fuel and food to three million Australians a week.

The property initial public offering — and the lure of significant capital returns to shareholders — was seen internally as the first step to a rebuild of the company: ticking off an IPO, rebooting its convenience store strategy and finding a replacement for Segal.

Halliday concedes there were tensions among shareholders.

“There was certainly some frustration that we needed pathways to unlock … the property value that was trapped inside the company and (were) not receiving adequate value or rating from the market.” But Halliday’s first big strategy push wouldn’t prove to be all smooth sailing. Just as it was nutting out the final messaging around the property float, a bombshell dropped.

Canadian convenience store giant Couche-Tard — French for “night owl” — emailed Caltex’s board on October 11 with a $32 a share takeover bid.

Halliday admits he was caught somewhat by surprise.

“I think it’s probably fair to say that it did surprise. At the same time, maybe not as well, given the way the company was impacted last year by softer refining margins, softer retail fuel margins and very challenging market conditions.”

He describes that initial bid as opportunistic, a favoured catch phrase for takeover targets looking to cast doubt on an early offer.

“Certainly the company was at a low point,” Halliday reasons. “In March 2015 the company’s share price was up in the high $30s and after our half-year result last year the company was down in the low-to-mid $20s. To say it was opportunistic in that sense is probably fair. But they picked their timing and could see that a high-quality asset position was trading very cheaply. They saw an opportunity to come in and make a proposal.”

That bid, and a higher $34.50 offer in November, were rejected by Caltex chairman Steven Gregg but the game was far from over.

EG, owned by the British billionaire Issa brothers and buyer of Woolworths petrol stations, entered the fray holding informal talks with Caltex just before Christmas.

Couche-Tard also regrouped and lobbed a $35.25 a share offer in February, worth $8.8bn, high enough for it to win full due diligence, which will carry on for the first few weeks of March.

The Canadian’s management team, including boss Brian Hannasch, are expected in Sydney this week to hold more management briefings with Caltex. EG, which lobbed its own rival tilt, is also waiting on due diligence as the Caltex board finalises its assessment of its offer.

Despite juggling the two bids, Halliday says he remains focused on keeping the business humming, pursuing its own strategies to boost growth while also remaining focused on delivering value for shareholders.

“Obviously it’s in our interest that they pay a fair price if a transaction is to happen and equally we are very confident in the pathway we have to create and unlock value for shareholders,” Halliday says. “We haven’t put a hard timetable on the process. The most important thing for us is we need to make sure we minimise distraction for the business and ensure we run a very disciplined diligence process.”

Still, wildcards remain for Halliday to navigate in his opening weeks as chief executive. The most pressing is coronavirus, which has quickly emerged as an issue for Caltex given its Ampol fuel supply base in Singapore.

It warned last week the coronavirus had emerged as a “big disturbance” for its Australian customers, with demand for jet fuel forecast to fall between 5-10 per cent due to cancelled flights.

Caltex has enough “safety stocks” of fuel in place and is holding daily meetings on assessing any new risks.

MST Marquee analyst Mark Samter said he’s been hugely impressed by Halliday since he started and says his role from here will hinge on the board’s next move.

“If they endorse a bid then his job is just to execute on that.”