One of Australia's largest petrol station and convenience retail operators Ampol (ASX: ALD) is taking steps to get New Zealand competition authorities on side ahead of a shareholder vote next week that could see it take control of leading fuel company Z Energy (ASX: ZEL) for NZ$2 billion ($1.87 billion).
Ampol - formerly known as Caltex - has today announced a deal to sell its NZ petrol station business Gull to Sydney-based Allego Funds for net proceeds of NZ$509 million ($475 million), implying an enterprise value of $534 million when leases and debts are included.
The Australian group took this measure to both shore up cash and ensure any potential competition law issues are fully addressed as part of its application to the New Zealand Commerce Commission (NZCC) to acquire Z Energy, although if the target's shareholders vote against the takeover on 25 March, then Gull will remain in Ampol's hands.
With the NZCC decision still pending, the commission and the NZ Overseas Investment Office (OIO) would also need to approve Allegro as the purchaser of Gull, as well as the relevant transaction documents.
If all goes to plan, the divestment is expected to take place in the first half of 2022.
The Gull transaction is fully funded with Allegro’s financing provided by Ares Capital and ASB.
Under the sales arrangement, Ampol has committed to a five-year fuel supply agreement with Gull as requested by Allegro, subject to annual price reviews and termination rights.
Convenience retail accounted for more than a quarter of Ampol's $1 billion-plus earnings in the 2021 calendar year - total earnings that were its highest since FY18 thanks to record total sales volume of more than 22 billion litres, strong performance from its Lytton oil refinery in Brisbane and record international earnings.
This helped lift Ampol's replacement cost operating profit (RCOP) by 72 per cent to $364.9 million.
"Ampol’s strong financial results and record fuel sales reflect the ability of our people to thrive under challenging conditions and demonstrates how our business and earnings can respond to the market recovery," managing director and CEO Matt Halliday said in February.
"Throughout the year, we focused on managing what we can control. The safety and wellbeing of our people has been paramount during this time, and I am pleased that during a period of ongoing disruption and uncertainty, we have achieved industry top quartile performance for personal safety.
"As we look ahead, we have a clear strategy to maximise the value of our existing businesses during the energy transition and to diversify and grow our international earnings through the Z Energy acquisition while we prepare for a low carbon future."
In working towards its low carbon future target, this year Ampol plans to roll out electric vehicle (EV) charging stations to more than 100 sites, launch a targeted pilot of an Ampol-branded electricity offer, and deepen its understanding of the hydrogen supply chain.
ALD shares rose 2.79 per cent this morning to $28.91 each.
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