Caltex share price skyrockets 12.5% on non-binding takeover bid

We examine some of the details behind today’s bullish takeover bid for Caltex, as well as the company’s recently proposed property IPO.

It’s been a very good week for Caltex (ASX: CTX) shareholders – with the share price now up more than 20% since Friday.

The first catalyst

On Monday Caltex (ASX: CTX) announced that it expected its Convenience Retail earnings (EBIT) to come it at $190 to $210m in the first-half of FY20. Driven by more favourable fuel margins, this represents a $20m to $40m increase on the prior corresponding period.

On these impressive expectations, the company’s MD and CEO Julian Segal, noted that in spite of a softer operating environment and a subdued Australian economy, 'Caltex has continued to outperform our competitors in the retail fuel market by leveraging our fuel supply gain expertise and our high-quality retail network.'

On the same day, the company announced that it was planning a property IPO 'of up to a 49% interest in [its] 250 core freehold sites.'

Under this proposed IPO, Caltex would keep a majority holding of these freehold sites, 'which would be placed into a property trust.' The company would also enter into long-term leases agreements with each site.

Importantly, as part of this plan, it is expected that Caltex would net around $80m to $100m in the first year alone.

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The second catalyst

Building on that positive trading update and IPO plan; Caltex today confirmed that it had received an 'unsolicited, conditional, confidential, non-binding and indicative proposal from Alimentation Couche-Tard Inc (ACT) to acquire all of the shares in Caltex.'

Under the scheme arrangement to acquire these shares – ACT is offering an 'indicative cash price of $34.50 cash per share less any dividends declared by Caltex.’

Even at today’s now elevated share price, that all cash offer would still represent a minor premium.

In saying that, the company noted that discussions remain in the preliminary stage – with ‘no certainty that these discussions will result in a transaction.'

Investors – as they often do – didn’t seem to care about such qualifications, with the Caltex (ASX: CTX) share price being bid some 12.5% higher in response to today’s non-binding takeover announcement.

Caltex share price: conditions of the deal

The timing of this proposal proves interesting at the very least, given Caltex yesterday flagging its intention of spinning of its freehold sites in the form of a property IPO.

Regardless of the timing, the following conditions would need to be met before a transaction could be completed, including:

'Due diligence, organising necessary financing for the transactions, no material asset sales, divestments or similar transactions, obtaining Foreign Investment Review Board approval, a unanimous recommendation by the Caltex Board and the Approval of the ACT Board.'

Unsurprisingly, this string of bullish announcements has pushed Caltex’s share prices to a 52-week high, with the share price up as much as 12.5% during today’s session alone.

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