Caltex will move swiftly to complete its $95 million purchase of a large Victorian service station franchise chain operating under its banner after getting the all clear from the competition watchdog.

The Australian Competition and Consumer Commission on Thursday announced it would not oppose the the deal that will see Caltex by stations from the Milemaker Petroleum chain – its single largest independent franchisee.

Caltex is proposing to acquire 46 of Milemaker’s sites in Victoria, around 30 of which are in metropolitan Melbourne.

The ACCC flagged concerns in March that the deal could result in a lessening of competition because Milemaker adopted an independent approach to setting prices even though it operates under the Caltex banner.

The company told the ASX it hopes to have the transaction completed by next week.

“The Milemaker acquisition will provide us with direct control of an additional 46 retail sites in what was previously an under-represented position in Melbourne and its outer suburbs,” Caltex chairman Greg Gailey said in his speech to the company’s annual general meeting.

“This improves our ability to service Australia’s second largest city and extend our new and improved retail customer offering.”

In a statement ACCC Chairman Rod Sims acknowledged that the sale could be seen to lessen competition but there would be enough tension between operators still to limit price increases.

“We know from our ACCC petrol reports and market studies that prices are cheaper for drivers where there are vigorous competitors like Milemaker in the market,” Mr Sims said.

“While the ACCC concluded that Milemaker contributes to downwards pressure on fuel prices in Melbourne there are also several other vigorous competitors with more Melbourne sites than Milemaker.

“This was a difficult decision, as competition will be reduced. However, the small size of Milemaker and limited direct competitive overlap with Caltex led the ACCC to conclude that the effect on competition is not likely to be substantial.”

Mr Sims said the test to knock back the transaction was that it would result in a “substantial” lessening of competition.

Milemaker was founded by Nick Andrianakos and it is run by his two sons Paul and Theo.

He signalled that the ACCC would continue to look at all retail fuel acquisitions closely.

Caltex or its agents set the price at around 59 sites in Melbourne, and in around a further 51 sites in other parts of Victoria.

There are approximately 155 other Caltex branded sites in Victoria which Caltex and its agents do not operate and where Caltex does not generally set the price.

Caltex has signalled a strong desire to boost its exposure to convenience retailing and has flagged a wider review of its franchise model.

Caltex bought a chain of New Zealand service stations from the Perth-based Rae Family for $300 million.

Mr Gailey said the push on convenience was a way to protect the company’s future in the face of the expected long-term decline in demand for petrol thanks to electric cars and growing fuel efficiency.

“Good companies think ahead,” he said.

“Caltex is already a major player in the convenience retail space but the board and management are convinced that there is a significantly untapped opportunity to better meet evolving consumer demand with a wider service offer and a strong focus on fresh produce.”

Extracted from The Sydney Morning Herald

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