Fuel and convenience retailer Caltex is planning to undertake an initial public offering (IPO) of up to a 49 per cent stake in 250 retail sites.
The retailer would retain a majority 51 per cent interest and enter into a long-term lease agreement for each site. The 250 sites represent all the freehold sites in a core network of 500 sites.
The retailer expects the proposed IPO to offer significant value for shareholders, while also allowing the company to maintain operational control of the core Convenience Retail network.
“This transaction is expected to release significant capital that could be used to further strengthen the balance sheet, fund future growth opportunities and return capital to Caltex shareholders in a way that unlocks the franking credits balance, in line with our capital allocation framework,” Caltex chief financial officer Matt Halliday said in an update to the ASX on Monday.
Caltex expects to make rental payments of between $80 million to $100 million to the property trust in the first year.
At the company’s half year results in August, a 54 per cent drop in profit prompted plans to drive growth from an enhanced convenience offer through about 500 core sites. As part of its plans to reduce costs, the company is offloading 50 higher-value metropolitan petrol stations.
Caltex issued an update on its convenience retail business on Monday morning, reporting that annual earnings before interest and tax is expected to be in the range of $190 ‐ 210 million, a significant increase on the first half of 2019, driven by an improvement in fuel margin.
“Despite the softer conditions from ongoing Australian economic weakness, Caltex has continued to outperform our competitors in the retail fuel market by leveraging our fuel supply chain expertise and our high-quality retail network,” Caltex managing director and CEO, Julian Segal, said.
Segal also pointed to the recent opening of the first Caltex Woolworths Metro store in North Ryde as another milestone for the retailer. A second store is set to launch in Kingsford, NSW, this week and a third will open in Melbourne early next year. A further update on the store roll out will be given at its Investor Day.
If the proposed IPO is approved, the transaction is expected to be completed in the first half of 2020.