Couche-Tard’s $8.6 billion takeover proposal has thrown a spanner in the works of succession planning at Caltex, with the board already close to naming a successor to Julian Segal.

If it wasn’t for the potential bid – which Caltex initially rejected earlier this month – a successor would have been named already.

Given three of the four candidates before the board are external there is a reluctance to proceed, given the uncertainty over who will own the company next year.

Canada’s Couche-Tard is a convenience retailer operating 16,000 stores in 26 countries and, putting price to one side, the Caltex board is somewhat bemused at its interest in the company.

Caltex imports roughly one third of the fuel into Australia and straight convenience store earnings, excluding fuel, are only in the $25 million range.

A $8.6 billion bet on $25 million in earnings is a big one on any scale

Two thirds of Caltex’s earnings are from outside its retail business, so the question being asked at board level is whether the Candiians really understand what they are buying.

To some extent the question is irrelevant because if it places a $40 a share bid on the table then Caltex chair Steven Gregg would have to take Couche-Tard seriously.

The Canadians have said they want to proceed by way of a scheme of arrangement, which is effectively a joint proposal with tacit support of the Caltex board.

This explains why Gregg wants to be assured the Canadians know what they are buying.

He needs to know whether the deal is executable, which means it is capable of getting Foreign Investment Review Board approval, along with being satisfied on balance sheet and other issues.

Maybe the FIRB might baulk at effectively putting Australia’s fuel security in the hands of a global convenience store operator.

Shareholders fundamentally just want to see the colour of the money and a bid at close to $39 would satisfy most, although obviously the more the better.

Gregg has offered the Canadians a private management briefing just to be sure they enderstand the business.

This would be relatively short – no more than a day – but to get to that stage Couche-Tard chief Brian Hannasch would need to sign a confidentiality agreement and a standstill agreement.

That is hoped to happen by week’s end, clearing the way for the management briefing early in the New Year.

Then it is up to the Canadians to increase their offer from the last proposed $34.50 a share or, at the very least, make a formal bid to formalise the response.

In the meantime Caltex’s succession issue is on hold pending some progress. The company

is also working to progress its planned circa $400 million plus hybrid issue and conversion of 250 retail sites into a high yield REIT.

Shareholders will want to learn about progress with the Canadians and so will Gregg so he can end the disruption and get on with appointing his new chief.

Extracted from The Australian