Caltex Australia Limited (ASX: CTX) recently announced about the interest that the group has in the Woolworths Limited’s (ASX: WOW) portfolio of petrol stations and seems to be a frontrunner in the sales process. The market estimates the business to be worth $1.5 billion. As per the recent announcement, CTX has made aconditional and confidential proposal to purchase the business from WOW.
With this move, CTX expects to continue the successful fuel alliance with WOW. Further, CTX may attain about 40% of the fuel retail market if the deal passes successfully given that WOW has 600 outlets with 21% share of the Australian fuel market and CTX has about 16% share of the market. CTX currently supplies petrol and diesel, exclusively, to Woolworths and has annual sales volumes of 3.5 billion litres per annum. Caltex has made it clear that any transaction remains uncertain but the group intends to have an outcome that will be focussed on shareholder returns. The group has also announced of updating the market in case there are any material changes to the existing wholesale supply arrangements with Woolworths.
Caltex is yet to get the approval from the Australian Competition and Consumer Commission (ACCC) for the deal. The group had earlier been shown a red signal by ACCC in 2010 when CTX tried to bid for the former Mobil network. The decision may thus come in view of the fact that CTX has its own network of petrol stations. Meanwhile, other players in the sales process race include BP and Puma Energy, and BP is said to be holding around 11% of the Australian retail fuel market as of now. Woolworths had earlier announced about receiving incomplete and conditional proposals from several parties for purchasing the fuel business.
With the above announcement, CTX share is down 4.2% on October 18, 2016 post the 6.29% surge in last one month (as at October 17, 2016).
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