Caltex Australia to float 250 convenience retail outlets in potential $1b IPO

Caltex Australia ASX CTX IPO convenience retail network
Caltex Australia is planning an IPO for up to a 49% interest in 250 core freehold sites.

Fuel and convenience retailer Caltex Australia (ASX: CTX) has announced it will undertake an initial public offering of up to a 49% interest in 250 of its core convenience retail sites.

The IPO – which analysts expect could be worth up to $1 billion – will see Caltex retain a majority 51% interest in the freehold sites, which sit within an identified core network of 500 petrol and convenience outlets, and enter into long-term lease agreements with each site.

Sites will be placed into a property trust which is anticipated to receive rental payments from Caltex of between $80 million and $100 million in the first year.

Caltex said it would also divest 50 of its metropolitan freehold sites identified as having the potential for “higher value through alternative use”.

“[Our ongoing retail] network review has provided a segmented view of our retail business and provides an opportunity to optimise the financial structure underpinning our retail operations at a time of attractive valuations for quality freehold property assets which are well in excess of Caltex’s trading multiple,” said chief financial officer Matt Halliday.

“This transaction is expected to release significant capital which could be used to further strengthen [our] balance sheet, fund future growth opportunities and return capital to shareholders in a way which unlocks the franking credits balance, in line with our capital allocation framework.”

Implementation of the proposed IPO is subject to the normal approvals, consents and waivers from third parties, as well as prevailing market conditions.

If implemented, Mr Halliday said it will allow Caltex to maintain operational control of the company’s core convenience retail network.

The transaction is expected to complete in the first half of 2020.

Strong performer

Caltex managing director Julian Segal said the company’s convenience retail business continues to be a strong performer, with expected earnings before interest and taxation for the second half of 2019 expected to hit $210 million – an increase of $40 million on first half figures.

A corporate refocus on retail fuels is believed to be the driver behind market share gains during the year.

Total convenience retail fuel sales volumes for the full year are expected to be approximately 4.8 billion litres.

“Despite the softer conditions from ongoing Australian economic weakness, [we have] continued to outperform our competitors by leveraging our fuel supply chain expertise and our high-quality retail network,” Mr Segal said.

At mid-afternoon, shares in Caltex were trading 6.57% higher at $29.68.