Caltex grants Couche-Tard further due diligence amid takeover bid
Granting further due diligence to Couche-Tard is a signal its improved bid may win the backing of Caltex’s board.
Caltex has granted full due diligence to Alimentation Couche-Tard, signalling the Canadian suitor’s improved $8.8bn takeover bid may win the backing of the fuel retailer’s board.
A $35.25 a share bid lobbed on Thursday, the third offer from the Quebec-based convenience store giant, appears to have received stronger support from Caltex shareholders and a change of attitude from the board, which rejected two earlier tilts.
“The Caltex board considers that it is in the interests of Caltex shareholders to engage further with Couche-Tard,” the target said in a statement on Monday. “Accordingly, Caltex has decided to provide Couche-Tard with the opportunity to conduct additional due diligence on a non-exclusive basis.”
Caltex had earlier offered Couche-Tard “selected non-public information” and the move to offer full due diligence is “implicit acceptance” of the price bump, broker Ord Minnett said.
“If the Caltex board believed the proposal price of $35.25 undervalued the company and did not reflect compelling value for Caltex shareholders, then it would have not allowed due diligence,” Ord Minnett said.
Caltex shareholders — who late last year had been agitating for a price closer to $40 a share — were likely involved in “gamesmanship”, or their view of the long-term prospects of the company had changed, given only a relatively small increase in the price appeared to have won over investors, Ord Minnett said.
“The decision by Caltex to allow due diligence, which we assume would have come post some engagement with major shareholders, suggests earlier shareholder comments were gamesmanship or their view on long-term value has been lowered.”
Chairman Steven Gregg immediately hit the phones on Thursday and Friday after disclosing the higher offer, holding conference calls with top 10 shareholders to gauge their appetite for the bid boost.
Investors told The Australian the mood had shifted, with Mr Gregg now open to a deal.
Shareholder Merlon Capital said it had pushed Mr Gregg on Friday for the board to open up for due diligence.
“The board and management have done well in substantially reducing the risks around due diligence, and we believe these risks can be managed further by tightening the terms to reduce the ability of the bidder to exit the process on subjective matters,” Merlon’s Hamish Carlisle said.
“Notwithstanding a deterioration in refining margins, our view on value as provided has not changed, with the bid reflecting the upper end of this range.”
While the fuel retailer had previously rejected an initial proposal of $32 a share in October and a bump to $34.50 in late November, the latest bid represents a tempting payday for shareholders amid volatile conditions in the oil refining industry.
Couche-Tard has declared its latest proposal a “best and final” price if no competitors emerge with rival offers.
The UK’s EG Group and Macquarie have also been in talks about preparing a rival bid.
“The EG and Macquarie proposed consortium makes intuitive sense given capability in convenience, previous interest in Shell Australia assets and oil and gas infrastructure (from Macquarie), although internal transfer pricing, alignment of interests and durability of Ampol earnings are questions,” Ord Minnett said.
Caltex shares rose 3.87 per cent to $34.85 on Monday.
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