Yesterday much of the news relating to the sell-down by oil giant Chevron of its 50% stake in Caltex Australia Limited (ASX: CTX) for $35 a share focussed on the fact that it was the single largest block trade ever to take place on the ASX with a value of $4.7 billion.
While this was indeed an eye catching number, the more interesting story was the 8% decline in the share price.
Here are three reasons why now could be an opportune time for investors to consider buying shares in one of Australia's leading refiners and petrol retailers.
- The removal of Chevron from the share register increases the liquidity of Caltex's shares and arguably opens it up to merger and acquisition (M&A) activity. Amongst the more interesting potential acquirers of this leading petrol retailer would be Woolworths Limited (ASX: WOW) or Wesfarmers Ltd (ASX: WES), who would be attracted to the enormous retail footprint of Caltex. However, it's likely that both of these firms would face regulatory hurdles which would prevent such a move occurring. As such, any M&A activity could be more likely to emanate from a strategic buyer or a supermarket competitor such as Costco or Aldi looking to build scale in Australia.
- The drop in share price has arguably led to Caltex's stock trading at an attractive price. Perhaps even more enticing is the dividend yield post Chevron. This is because shareholders are set to benefit from the release of franking credits which have been building up due to Chevron being unable to benefit from them.
- Caltex is currently in the midst of a structural change as it refocuses its business away from petrol refining. The company is the clear domestic leader in transport fuels with the group supplying one third of Australia's transport fuels. On top of this, Caltex is one of the largest convenience store retailers and franchisors in Australia.
