Continuing soft conditions for oil refining and a lack of clear rival bidder competition mean Caltex Australia’s suitor Alimentation Couche-Tard might be in no hurry to decide on its next step in the $8.6 billion takeover.

The Canadian convenience retailer is understood to be prepared to take its time to digest the detailed confidential information about Caltex provided to it by top management in two days of briefings in Sydney last week.

Meanwhile, debt market support for Couche-Tard was confirmed overnight Sydney time by the keen appetite for a $US1.5 billion ($2.2 billion) debt issue, which is understood to be unrelated to any intentions towards Australia’s largest supplier of petrol and diesel.

The two-tranche issue of notes, which Couche-Tard said was to repay some outstanding debt and for “general corporate purposes”,  was as much as seven times oversubscribed, enabling the Canadian firm to secure a better price than expected, according to Bloomberg.

The notes were rated Baa2 by Moody’s, which pointed to Couche-Tard’s large-scale convenience store and petrol station operations, its strong positions in several markets and its “disciplined” operating track record. It also cited the firm’s “demonstrated ability” to generate positive free cash flow to “de-lever” after closing large debt-funded acquisitions.

Couche-Tard’s proposed offer of $34.50 a share for Caltex was rejected as inadequate by the target’s board, which still left the door open for its suitor to sweeten its offer.

In the meantime, Caltex is fielding approaches from several other parties, including Britain-based EG Group, which last year bought Woolworths’ petrol network in Australia for $1.73 billion. It refused Couche-Tard’s request for exclusivity in negotiations on a potential deal.

However, none of those other approaches is understood to involve an offer for the whole of the company, but rather to focus on either the convenience retailing or the fuels infrastructure divisions.

Shares in Caltex have traded above Couche-Tard’s proposed offer price since the rival interest was disclosed. The shares were flat at $35.19 at the close on Thursday.

The weak conditions for refining have been underscored by Caltex’s advice earlier this month of a softer than expected end of year for margins at its Lytton plant near Brisbane. It also signalled the softness would run into this year as the introduction of new sulfur restrictions on marine fuel was leading to higher premiums on crude oil purchases.

Still, Fitch Solutions on Thursday said the boost to crude oil demand as a result of the new shipping fuel standards appeared weaker than it had anticipated, which should cap gains in the oil price.

“This will be a welcome relief to refiners, which face a growing glut in the global products market,” Fitch Solutions said.

Standard & Poor’s last week said it expected the weak operating conditions that are affecting Caltex’s retailing and refining earnings would persist over the next 12 to 24 months.

Caltex is to release its 2019 full-year earnings on February 25, after giving guidance early last month of lower earnings in both parts of its business.

Extracted from AFR