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COVID-19 puts Caltex deal on ice

 

Couche-Tard (ATD) has shelved their acquisition plans for Caltex amid the uncertainty and negative financial impact of COVID-19.

The Canadian convenience giant has announced that while they view Caltex as a ‘strong strategic fit’ for their brand and an ‘important component for its Asia Pacific expansion strategy’, they will not proceed with the $8.8 billion proposed deal.

However, ATD stated they remain ‘highly interested’ in formalising a transaction, once both parties are in a clearer financial position. Adding the uncertainty of the global pandemic and the negative impact on the industry had forced the decision, and their present focus was on managing their own business through the period.

It comes as oil prices hit a new historic low this week as US crude oil prices turned negative as drops in global fuel demand impacts storage capacity, impacting sales and with any buffering from OPEC’s decision to cut production by an initial 9.7 billion barrels per day yet to flow on to the market.

In Australia, Caltex has brought forward a planned maintenance shut-down of their Brisbane refinery in a bid to soften the economic hit.

In a statement released on their decision, ATD’s president and CEO Brian Hannasch said they remain optimistic the deal will proceed at a later date.

“We remain convinced of the long-term financial and strategic merits of an acquisition of Caltex and all the benefits it would offer to the shareholders of both companies.”
“Despite the COVID-19 situation, we have worked to complete due diligence on schedule through a significant investment of time and money. Our current plan would be to re-engage the process once there is sufficient clarity as to the global outlook, and the work done to date should mean that we will be able to quickly formalise our proposal at that time.”
Caltex chairman Steven Gregg said Caltex was in a strong position to weather the economic impact of the pandemic and said the company was open to future proposals once conditions had eased.
“Since receiving the unsolicited approach from Couche-Tard in late 2019, the Board has carefully assessed all proposals received with a focus on maximising shareholder value.  The Caltex and ATD teams have worked together constructively during the engagement period despite the challenges from COVID-19.  We remain confident in the strength of Caltex as an independent business, and should we receive an approach in the future would be willing to consider it on its merits,” Mr Gregg said.

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