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Caltex share price tumbles after rejecting takeover proposal

In morning trade the Caltex Australia Limited (ASX: CTX) share price has tumbled lower.

At the time of writing the fuel retailer’s shares are down 3.5% to $33.52.

Why is the Caltex share price tumbling lower?

Investors have been selling Caltex’s shares this morning after it rejected a takeover approach by Alimentation Couche-Tard.

On November 26 Caltex revealed that it had received an unsolicited, conditional, confidential, non-binding and indicative proposal from Alimentation Couche-Tard.

Alimentation Couche-Tard offered to acquire Caltex by way of scheme of arrangement at an indicative cash price of $34.50 per share less any dividends.

This morning Caltex announced that its board has concluded that the proposal undervalues the company and does not represent compelling value for Caltex’s shareholders.

It has, however, offered to provide Alimentation Couche-Tard with selected non-public information to allow the suitor to formulate a revised proposal. Though, it warned that there is no certainty that the discussions will result in a revised proposal from Alimentation Couche-Tard.

Why was the takeover offer rejected?

A number of considerations were taken into account when rejecting the proposal.

This includes the strategic value of its assets, the view that its earnings are at the low point in a cycle, the significant opportunities available in the Convenience Retail business, the proposed spin-off of Convenience Retail sites, and the consistent performance of the Fuels & Infrastructure business and its international growth trajectory.

Caltex’s Chairman, Steven Gregg, explained: “Caltex has a well-developed strategy, privileged assets, strong leadership and compelling growth opportunities that the Board believes will deliver attractive value for its shareholders over time. We look forward to sharing further details on the execution of our strategic plan at our Investor Day on 5 December.”

“The Caltex Board is focused on maximising shareholder value and will carefully consider any proposal that is consistent with this objective,” the chairman concluded.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.