Fuel retailer and refiner Caltex Australia Limited (ASX: CTX) today announced it is to acquire New Zealand-based fuel importer and retail market supplier Gull New Zealand. The deal is priced around $325 million on 8.2x the Gull Group's forecast 2017 earnings before interest, tax, depreciation and amortisation.
Gull is a vertically integrated business that imports fuel via its Mount Maunganui terminal before selling it to New Zealand's motorists via a network of 77 retail sites around the country. It also supplies fuel to commercial customers on a wholesale basis.
The acquisition makes sense for Caltex as it provides an entry route into a low-risk market with a challenger brand that could grow via increased investment and supply site expansions.
Caltex recently forecast a profit for the year ending December 31 2016 of between $560 million to $580 million excluding significant items, although that forecast also includes an inventory oil gain of approximately $60 million thanks to the recently rebounding Brent crude oil prices.
The group also forecast that net debt would be around $450 million at the end of 2016 prior to the announcement of today's $325 million acquisition, with no word as to how it will be funded other than to reaffirm that the group is committed to retaining its BBB+ credit rating.
The acquisition is also expected to be earnings per share accretive in the first full year of ownership, although it is unclear whether the deal will be funded by cash, debt, or the potential issue of new equity in Caltex.
The group is also reportedly in the race to buy the significant petrol station portfolio of Australian retailer Woolworths Limited (ASX: WOW). If Caltex is victorious in this race it could bring some scale advantages, although the final price tag could mean a significant capital raising.
