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Caltex Australia (ASX: CTX) has today proposed an initial public offering (IPO) for a property trust with an interest of up to 49 per cent in 250 convenience retail freehold sites.
With all the appropriate approvals, the transaction is due for completion in the first half of the 2020 calendar year, with expectations the trust will receive rental payments from Caltex of between $80-100 million in the first year.
The decision forms part of an ongoing retail network review with plans to enhance the retail offering on 500 sites, alongside plans to divest 50 metropolitan freehold sites identified as having a higher value through alternative use.
Caltex intends to enter a a long-term lease agreement over each site in the proposed trust, helping it maintain operational control over the convenience retail network.
"Caltex is focussed on unlocking value in our portfolio for shareholders and the segmentation of our network following our Convenience Retail network review has allowed us to consider a range of options to release capital from our high-quality property assets," says Caltex Australia managing director Julian Segal.
"This includes realising the value of Caltex's core Convenience Retail freehold sites as well as the 50 higher value alternative use sites.
"We have had strong interest in the first tranche of 25 higher value alternative use sites that have been brought to market and we will provide further updates once this process has concluded."
Chief financial officer Matt Halliday says the proposed IPO is expected to release significant capital and improve returns for shareholders.
"The network review has provided a segmented view of our retail business and this now provides an opportunity to optimise the financial structure underpinning our retail operations at a time of attractive valuations for quality freehold property assets that are well in excess of Caltex's trading multiple," says Halliday.
"This transaction is expected to release significant capital that could be used to further strengthen the balance sheet, fund future growth opportunities and return capital to Caltex shareholders in a way that unlocks the franking credits balance, in line with our capital allocation framework."
Caltex also announced its expected convenience retail EBIT of $190-210 million for the current, representing anr uptick of between $20-40 million on the first half driven by an improvement in fuel margin.
The company continues to grow its fuel market share with total convenience retail fuel sales expected to be at around 4.8 billion litres in the calendar year.
""Despite the softer conditions from ongoing Australian economic weakness, Caltex has continued to outperform our competitors in the retail fuel market by leveraging our fuel supply chain expertise and our high-quality retail network," says Segal.
"We also recently opened our first Caltex Woolworths Metro store in North Ryde, which is another milestone in the execution of our retail strategy."
CTX shares were up 6.21 per cent at $29.58 at 11:20am AEDT.
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