Z Energy buys Caltex service station chain for $785 million

Tuesday 2nd June 2015

Z Energy, the listed service station chain, has agreed to buy rival Chevron New Zealand's Caltex branded network for $785 million, and plans to raise $185 million in new capital to help fund the acquisition.

Chevron announced last week that it was quitting its 11 percent stake in the Marsden Point oil refinery. With the sale of its retail chain, the US based oil giant is effectively exiting the New Zealand downstream fuels market, although it took a stake for first time in an offshore oil and gas exploration permit last year.

Wellington based Z Energy expects to benefit through procurement, operating cost and supply chain efficiencies under a common ownership, it said. The transaction will be funded through existing cash and debt, and Z said it will probably raise new equity in an underwritten pro rata share issue closer to the settlement date. The purchase price is 5.9 times Caltex's 2014 replacement cost operating earnings before interest, tax, depreciation, amortisation and fair value movements of $132 million.

A Caltex factsheet says it has 147 outlets in New Zealand, supplies fuel to the aviation and shipping industries and is a parter in the AA Fuelcard loyalty scheme. Z Energy is a shareholder in the rival FlyBuys scheme and its website says it has more than 200 outlets.

The deal is subject to permission from the competition watchdog, the Commerce Commission and consent from the Overseas Investment Office.

"The New Zealand transport fuels market is and will remain highly competitive," Z chief executive Mike Bennetts said in a statement. "As New Zealand know, Z and Caltex are only two players in a very dynamic marketplace in which there are currently five importers of refined fuel and crude oil and where motorists have the choice of at least a dozen fuel retailers."

Bennetts said the regulatory processes were expected to take several months, and the company will continue as usual.

"The acquisition is also a great fit with our longer term market growth strategy," Bennetts said. "Caltex is a successful and highly attractive business in New Zealand and the acquisition means we can use the scale of the combined operation for the expanded supply of biodiesel to a broader market."

Chevron New Zealand Holdings reported a net profit of $43.3 million in calendar 2014 on revenue of $2.23 billion, down from a profit of $86.5 million on sale of $2.34 billion in 2013. Chevron's total assets were valued at $573.9 million with liabilities totalling $374.4 million as at Dec. 31, compared to assets worth $784.9 million and liabilities of $536 million a year earlier.

Z last month reported replacement cost earnings before interest, tax, depreciation, amortisation and fair value adjustments, the company's preferred earnings measure, rose to $241 million in the year ended March 31, from $219 a year earlier.

Statutory net profit tumbled 93 percent to $7 million, which Z said was "negatively impacted by the 61 percent drop in the price of crude oil and refined fuels over the financial year

Z was advised by Goldman Sachs, Minter Ellison Rudd Watts, Chapman Tripp and PwC.

The company's shares were halted on the ASX yesterday during New Zealand's Queen's Birthday holiday, and last traded on the NZX at $5.10.

Both the Caltex and Mobil retail chains have been known to be on the market for some years, with Z and BP emerging as the country's largest transport fuel retailers.

BusinessDesk.co.nz

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