Fuel supplier Ampol will use the $682 million it nets from selling a half share in its service stations to pay down debt, a move that may undermine a multibillion-dollar takeover by Canadian convenience giant Couche-Tard and affect the group’s long-term flexibility.

The fuel supplier, midway through a major rebranding effort from its former Caltex identity, has spun off half of its service station properties into a $1.4 billion property trust to be jointly owned by Singapore sovereign wealth fund GIC and local real estate manager Charter Hall Group.

Charter Hall, in partnership with GIC, said it acquired a 49 per cent stake in the Ampol Property Trust. The entity will own 203 of Ampol’s newly rebranded convenience retail outlets across Australia.

Charter Hall, an Australian property fund manager known for its expansive ambition and active deal-making, will end up with a 5 per cent stake, worth $34 million, in the platform, with the bulk of ownership weighted towards the Singaporeans.

The Caltex servo soon to be rebranded Ampol.
The Caltex servo soon to be rebranded Ampol.

“This off-market transaction follows regular dialogue with the Ampol team over the past two years and reinforces our confidence in the convenience retail sector,” the fund’s managing director David Harrison said.

The deal may undermine Canadian giant Alimentation Couche-Tard and privately owned British company EG Group’s interest in Ampol. Both were vying for the Australian listed infrastructure and refinery company before the COVID-19 pandemic struck.

Couche Tard said in April it would return to the table with an offer for Ampol once the pandemic was contained after talks about its $8.8 billion were scuttled “through no fault of either party”.

RBC analyst Gordon Ramsay said Couche-Tard was likely to continue to view Ampol as a strong strategic fit for its business despite the property deal. “We think there remains a strong likelihood of a resumption in deal talks once more certainty is apparent in the economic outlook,” he said.

EG, also waiting out the pandemic, was mulling reviving its $3.9 billion in cash offer for Ampol’s convenience store business and separate shares in a new, listed infrastructure and refinery company – the renamed Ampol – made up of the remaining assets.

The sale of the petrol stations is credit positive for the fuel supplier in the short term but reduces long-term flexibility, Moody’s said.

Ampol will use the proceeds to reduce net debt towards the bottom end of its target range.

“Despite this short-term benefit, we view the transaction as credit negative in the longer term as Ampol will lose the financial flexibility to monetise key sites, if required,” Moody’s Investors Service vice-president Ian Chitterer said.

Ampol’s spun-off service station portfolio will have initial lease terms ranging from 11 through to 22 years, a 19.2 year weighted average lease expiry and 10-year initial lease renewal option terms, along with multiple five-year options thereafter.

The trust is expected to become a platform for future acquisitions and Ampol may sell additional sites into it over time. It will also provide capital for site development and upgrades.

Ampol will pay about $77 million in rental payments to the trust in the first year and will retain strategic and operational control of the sites.

Mr Harrison said Charter Hall had a 15-year relationship with GIC and and both were committed to building platforms with a focus on long leases and “strong underlying investment fundamentals”,

Ampol shares fell in morning trade, down about 3.8 per cent to $28.68.

Extracted in full from: https://www.smh.com.au/business/companies/caltex-spins-off-1-4b-ampol-property-trust-20200817-p55me1.html