May

27

Do we really believe this?

Filed Under Marketing Consultancy 

Caltex Australia (CTX) will acquire 302 Mobil service stations for around A$300 million — will require ACCC and FIRB approval which will take a few months.

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The Herald Sun reports this morning:

“Caltex, Australia’s largest refiner, said the $300 million acquisition was a good strategic fit and would enable it to become a leading player in the retail fuel sector.

“This is a great platform for growth for us,” managing director and chief executive Des King told journalists during a teleconference today.

“This acquisition will allow us to compete with the major retailers - Coles Express, Woolworths and BP.”

Caltex shares rose on the news and were up 6.6 per cent or 70 cents to $11.30 at 1139 AEST.

Mr King said as Caltex was largely a wholesale fuel seller, not a retailer, the acquisition would give it the retail strength of the leading three retail fuel companies.

The purchase of the service stations from Mobil Oil Australia, a subsidiary of US oil company ExxonMobil Corp, also reflected Caltex’s confidence in the Australian economy, Mr King said.

“We believe the Australian economy will recover,” he said.

He said “2009 is a transition year really and buying off this big American corporation and making them Australian is our belief that the Australian economy will recover.”

Caltex, which employs around 1,000 workers in its retail network, said it is buying the 302 Mobil service station sites as a going concern and expects to employ an extra 1700 workers.

Mr King said Caltex would fund the acquisition from internal sources.

“We had a long term commitment to a strong balance sheet and that enables us to self fund an acquisition without going out to raise any equity,” he said.

Mr King said the acquisition price includes estimates for inventories and other settlement costs that will be finalised on completion.

Mr King said Caltex had no change to its guidance.

“This is a platform for growth,” Mr King said on the teleconference.

“Basically this deal, with be cash neutral over years one and two.”

He said Caltex planned to invest about $180 million capital in the network over the next five years and that it would be a platform to grow the company’s earnings in the retail sector.

Caltex has not provided specific guidance for calendar 2009, but it said in April that it was cautiously optimistic earnings would lift this year.

Mr King said Caltex was still interested in other acquisition opportunities.

“We’re going to get this behind us first, but we’re certainly keen to look at any kind of good opportunities.”

Meanwhile, Mobil said the sale of its retail fuel business will help preserve jobs for workers employed in the business.

The 302 services stations are company owned or leased and are mainly based in the metropolitan areas in eastern Australia.

The sale does not include any other part of ExxonMobil’s Australian operations.

Mobil will continue to operate in the supply, terminaling and wholesale marketing of fuels products in Australia, as well as with its lubricants, petroleum specialties, refining and chemicals businesses.

The transaction is subject to Australian Competition and Consumer Commission (ACCC) and Foreign Investment Review Board (FIRB) review and clearance.

Caltex said it expects the approvals process will take some months to complete.

Woolworths said it was not involved in Caltex’s plan and only heard about the transaction this morning.

Woolworths owns and operates 407 petrol outlets independent of Caltex, although Caltex supplies petrol to Woolworths.

Woolworths and Caltex have an additional 133 alliance sites governed by contractual obligations that are co-branded but owned by Caltex or their franchisees.

“The pump prices for petrol at Woolworths-owned and Caltex alliance sites are controlled by Woolworths,” the retailer said.”

Now we all know that Woolworths are going hell for leather to establish the biggest loyalty card in Australia - in partnership with Qantas. Do we really believe that Caltex will have differential pricing from their Woolworths-branded sites?

It’s another Woolworths way of passing by the ACCC and trying to masquerade as a non-monopolistic organisation.

Pity the poor consumer. The media will do nothing due to Woolies ad dollars. The government will do nothing due to party donations. And, we all get screwed again.

Suddenly, France is even more attractive.

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