Any rival bidders for Caltex Australia are under pressure to rapidly declare their hand after Canada’s Alimentation Couche-Tard lifted its takeover offer to $8.8 billion and declared it woudn’t go any higher in the absence of competition.

The increase in the offer on Thursday to $35.25 a share came four weeks after confidential presentations by Caltex’s top management to the convenience retailing giant in two days of briefings in Sydney.

It is the second time Couche-Tard has increased its price despite no rival bid being on the table. Its initial proposal of $32 a share in October was lifted to $34.50 in late November. Both offers were rejected by Caltex’s board, led by chairman Steven Gregg.

Shares in Caltex rose 2.4 per cent to $33.73, some 4.3 per cent below the latest offer price. The stock traded as high as $35.96 in early January but has been sliding over the past few weeks amid weakness in the oil refining sector.

Couche-Tard chief executive Brian Hannasch said the increase in the bid delivered certainty for Caltex shareholders at a time of major uncertainty in global markets.

“We believe this further revised proposal takes into consideration the information provided throughout our engagement to date and represents a compelling premium for Caltex shareholders, as well as immediate certainty of value,” Mr Hannasch said.

He said the company looks forward “to our continued engagement with the Caltex board” on a potential deal, and re-stated Couche-Tard’s commitment to buy “the entire Caltex business” amid speculation that it is only interested in the convenience retailing portfolio, not the Lytton refinery in Brisbane.


Couche-Tard, which is French for ‘night owl’, has built a vast network of more than 16,000 convenience stores around the world, starting from a sole store opened in 1980 in Laval, Quebec. One of its main brands in the northern hemisphere is Circle K. Caltex has a network of 1900 outlets in Australia.

While other parties are also circling Caltex – most notably UK-based convenience retailer EG Group, which has teamed up with Macquarie – they are only interested in either its retailing business or its infrastructure assets.

Luring out rivals

Montreal-based RBC Dominion Securities analyst Irene Nattel said she saw Couche-Tard’s sweetened but still indicative offer and its use of the “best and final” description as “designed to surface any serious counterbidders”.

“Based on precedent we would assume that there is a deadline for [the] CTX board to respond, but at this time neither company has disclosed any such timeline,” she noted.

Ms Nattel’s Sydney-based colleague Ben Wilson said that while the size of the 2 per cent upward bump in the price may disappoint some shareholders, RBC thinks “any bump is a good bump” given the weak refining climate and an uncertain outlook for Caltex’s forced rebranding under the Ampol name.

The soft refining conditions were reinforced on Thursday when Caltex said its refining margin fell to $US5.78 a barrel in January, from an average of $US7.51 a barrel in the December 2019 quarter. It cited higher prices for oil imported into Australia for the decline, while adding it did not seen any impact on margins in January from the coronavirus outbreak.

RBC’s Mr Wilson said that on balance, the latest bid ”should be enough” to get support from the Caltex board.

Caltex said its board was “currently considering” the revised conditional non-binding proposal, involving an acquisition by an agreed scheme of arrangement. The $35.25 a share price is less any dividends paid by Caltex.

Couche-Tard is now seeking full access to Caltex’s accounts to firm up an offer, although it would only require an abbreviated period of due diligence given the confidential briefings in January, when some non-public information was already disclosed.

The Canadian suitor’s proposal is also subject to Caltex not making any significant acquisitions or divestments, which would include its planned spin-off of a stake in some retail sites.

Foreign Investment Review Board approval is also required, although Couche-Tard is understood to have received legal advice that such clearance could be secured.

The Couche-Tard team, headed by co-founder and chairman Alain Bouchard and Mr Hannasch, reworked its plans amid expectations that other parties are circling.

Mr Hannasch said the company had long viewed the Asia-Pacific region as strategic to its future growth.

“We remain a committed buyer of the entire Caltex business, where we see a potential opportunity to leverage our deep operating expertise and global insights to support and grow the Caltex business,” he said.

Still, Couche-Tard does not own any refineries worldwide, leading to the speculation that it could move to sell or close the Lytton refinery in Brisbane should it be successful.

Extracted from AFR