Circle K Owner to Grow in Asia With $5.8 Billion Caltex Bid

(Bloomberg) -- Alimentation Couche-Tard Inc.’s A$8.6 billion ($5.8 billion) sweetened offer for Caltex Australia Ltd. will give Couche-Tard a large presence in Asia for its retail business and it may divest Caltex’s refining and infrastructure unit down the road.

Couche-Tard offered A$34.50 cash per share, higher than an earlier confidential bid of A$32 a share that was rejected, Caltex said in a statement Tuesday. The fresh bid is 16% higher than Monday’s closing price. Couche-Tard rose as much as 2.2% to the highest in four months, while shares of Caltex jumped 13% Tuesday.

Caltex gets about 23% of its annual revenue from its convenience and retail operations, with its fuel and infrastructure business accounting for the rest, according to data compiled by Bloomberg.

Here’s what analysts said.

TD Securities

Couche-Tard has indicated its willingness to design the transaction structure-Tard has been looking for an acquisition in Asia Pacific that and Caltex’s network of about 790 sites would fill that role, TD Securities analyst Michael Van Aelst said in a note. He doesn’t expect Couche-Tard to be interested in retaining the fuel and infrastructure division. The deal may be neutral or up to 6% accretive to earnings per share which is about C$1 to the share price, he said.

Desjardins

“We expect a key objective is to identify one or more partners interested in owning and operating the Caltex refinery, and the fuel distribution/ logistics business in Australia and neighbouring regions,” Desjardins analyst Keith Howlett said in a note Tuesday.

Caltex’s retail business is what would be of interest to Couche-Tard and it might have buyers in mind for Caltex’s fuel and infrastructure unit, he said in a Nov. 25 note. Media reports have suggested PetroChina and DCC Plc as possible buyers, he said.

Transaction value for the retail business is about $2.5 billion to $3 billion and final valuation will partially depend on the amount of owned real estate within that business unit as Caltex has announced earlier this week that planned an initial public offering of a 49% stake in 250 retail freehold sites.

RBC

A potential acquisition of Caltex would be consistent with Couche-Tard’s five-year plan to double the size of the company through a combination of strong organic performance and acquisitions, said RBC analyst Irene Nattel. “‘Based on conversations with management, Australian c-store networks are compelling due to a well-developed fuels industry, while generally undermanaged inside store operations provide meaningful opportunity to surface incremental value,” she said.

--With assistance from Michael Bellusci.

To contact the reporter on this story: Divya Balji in Toronto at dbalji1@bloomberg.net

To contact the editors responsible for this story: Madeleine Lim at mlim131@bloomberg.net, Jacqueline Thorpe

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