Ampol has confirmed that it is in exclusive talks to acquire New Zealand fuel distribution and retailing company, Z Energy.
Headquartered in Wellington, Z Energy owns and manages around 330 petrol stations and truck stops in New Zealand under the Z and Caltex brands, supplying four billion litres of fuel annually.
Ampol has proposed to acquire 100 per cent of the shares of Z Energy Limited for a cash offer price of NZ$3.78 per share.
Ampol’s offer price is a compelling value proposition for Z Energy shareholders and represents a 35 per cent premium to last close on 26 July 2021. It also represents a 47 per cent premium to last close price prior to the first offer on 2 June 2021.
In addition to the offer price, Ampol’s proposal includes a dividend adjustment mechanism which permits Z Energy to pay a dividend equal to NZ 0.055 cents per share per calendar day, for each day that the transaction extends beyond 31 March 2022, up to a limit of NZ 10 cents per share.
Subject to further discussions with Z Energy, Ampol is also willing to consider an amendment to the current proposal to include partial Ampol share consideration.
The Z Energy Board has concluded that it is in shareholders’ best interests to grant Ampol a four-week period for confirmatory due diligence which will be conducted on an exclusive basis.
Ampol’s CEO and Managing Director, Matt Halliday, highlighted the benefits a successful acquisition would bring to both the Australian and New Zealand markets.
“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. A successful acquisition would create an ANZ leader in fuel, with significant regional scale and trusted and iconic brands on both sides of the Tasman.
“Ampol has a strong track record of reliably delivering transport fuels in New Zealand, with NZ$80 million invested since 2016. Should a transaction proceed, Ampol believes that it will bring considerable benefits to the New Zealand market, helping to maintain fuel security and support New Zealand industry. Given the ongoing work of both organisations in energy transition, a combined entity would provide a new, larger platform, supporting the development of lower emissions energy solutions for customers across Australia and New Zealand.
“We look forward to working with the Z Energy team to complete our confirmatory due diligence such that a transaction can ultimately be put to Z Energy shareholders.”
The proposed transaction is expected to be subject to customary conditions, which include a Z Energy shareholder vote and New Zealand Court and regulatory approvals, namely, obtaining a clearance under the New Zealand Commerce Act and Overseas Investment Act.
As part of the New Zealand Commerce Act clearance process, Ampol intends committing to a material divestment to ensure any potential competition law issues are fully addressed because of the transaction (this may include a full divestment of Gull).
The transaction would be conditional on obtaining clearance, which would be based on this divestment undertaking (to be agreed with the New Zealand Commerce Commission). It is expected that divestments would occur within a prescribed period 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.
Subject to finalising commercial terms, due diligence, and regulatory approvals, Ampol intends to fund the acquisition in accordance with its Capital Allocation Framework, which would include new debt facilities, proceeds from any divestments, and an equity issuance in the order of A$600 million. The equity issuance could be in the form of partial share consideration to Z Energy shareholders or Ampol conducting a pro rata entitlement offer to its own shareholders, which would be done following regulatory approval and nearer the date of completion.