Australia's Ampol makes $1.97 billion takeover offer for Z Energy

Monday, 23 August 2021

Z Energy is reported to be the subject of a takeover bid from Australian company Ampol.

Australian fuel retailer Ampol, which owns Gull, has made an offer to take over Z Energy.

Z Energy was placed on a trading halt on the NZX stock exchange on Monday morning with the market buzzing about a possible takeover bid.

Now Z Energy has confirmed it has received a bid, with an offer of $3.78 per share, which Z's board believes undervalues the company.

The takeover officer would have to be approved by Z Energy’s shareholders, but any deal would have to be passed by the Commerce Commission.

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Ampol signalled it would sell Gull, if the Commerce Commission made that a condition of allowing the proposed takeover of Z Energy to go ahead.

Z Energy has had a hard time since the Covid pandemic struck, with its share price having fallen from around $4.50 in February last year to just $3.

Ampol’s offer values Z Energy at just under $1.97 billion. Z Energy’s current sharemarket capitalisation started the day at around $1.58b.

Ampol is Australia’s largest branded petrol and convenience network, but it also owns New Zealand petrol retailer Gull.

It also has operations in refining, importing and marketing fuels and lubricants, and is the largest transport fuels company listed on the Australian Securities Exchange (ASX).

Z Energy is a publicly listed company on the Australian and New Zealand stock exchanges with around 10,000 shareholders.

Z Energy said it had agreed to a period of due diligence and exclusivity with Ampol over the bid.

“The proposal from Ampol follows earlier unsolicited, confidential and non-binding indicative proposals in the form of letters or verbal communications to Z for $3.35, $3.50 and $3.60 per share,” Z Energy said.

Z Energy was formed in 2010 when Infratil and the New Zealand Superannuation Fund bought Shell's retail business.

“Z and Ampol are discussing the option to include a partial Ampol share consideration and/or a secondary listing of Ampol on the NZX.”

Ampol’s chief executive Matt Halliday, said: “Z Energy is a logical growth opportunity for Ampol as both companies are market leaders in their respective home markets and have very similar business models.

Mike Bennetts, Z Energy chief executive, says Ampol's bid to take over Z Energy could result in other companies putting offers on the table.

“A successful acquisition would create an Australia and New Zealand leader in fuel, with significant regional scale and trusted and iconic brands on both sides of the Tasman.”

He said the deal would require approval from the Commerce Commission, and Ampol was prepared to sell Gull to see it go through.

“It is expected that divestments would occur within a prescribed period of time following completion of the transaction. Ampol is willing to work with Z Energy and relevant regulatory authorities, including Overseas Investment Office, and is confident in its ability to receive required approvals,” he said.

Mike Bennetts, Z Energy’s chief executive, said the company’s board did not think Ampol’s offer was high enough, which was why Z’s board had not recommended the proposal to shareholders.

First contact had been made on June 2 when Steven Greeg, chair of Ampol, called Abby Foote, the chair of Z Energy.

“This has all been very friendly as opposed to hostile,” Bennetts said.

Lockdowns in New Zealand have hurt New Zealand petrol retailers like Z Energy, while Ampol, which is bidding for Z, has takena financial hit from Australia's lockdowns.

Since then, Ampol had raised it’s offer twice, Bennetts said.

There would now be a four-week period of exclusivity between Z and Ampol, for Ampol to do its due diligence, and to have the opportunity to lift its offer. The board of Z Energy would seek feedback from its shareholders.

“That will allow Ampol to reflect on its current offer,” Bennetts said.

Other companies might decide to throw their hats into the ring.

“There may be others who say, ‘I didn’t realise that Z was open to approach’, and put an offer on the table,” Bennetts said.

Mike Noon, general manager for motoring affairs at AA, called the bid for Z Energy a “big one” for households.

“Z owns Caltex, so that's 50 per cent of the market,” he said.

But, he said, if the takeover went ahead, conditional on Ampol selling Gull, it would make little difference to motorists.

Noon said competition in the fuel market had increased with law changes brought in last year following a review of the fuel market by the Commerce Commission.

The takeover proposal would be implemented by way of a scheme of arrangement, which is a court- supervised process under which a meeting of shareholders would be held to vote on the transaction.

Bennetts said Ampol believed a deal could be completed within four to six months, including securing regulatory approvals.

“In Z’s view it would probably take twice as long as that,” Bennetts said.