Caltex Plans Property IPO

Caltex Australia will undertake an initial public offering of up to a 49 per cent interest in 250 core convenience retail freehold sites in the first half of next year.

In an announcement on Monday, Caltex says it will retain a majority 51 per cent interest in the freehold sites, which would be placed into a property trust, and enter into a long-term lease agreement over each site.

The 250 sites making up the proposed property IPO represent all freehold sites which the petrol giant says is within its identified core network of 500 sites.

Caltex Australia managing director Julian Segal says Caltex expects the property trust will receive rental payments from Caltex of approximately $80 million to $100 million in the first year.

In September, the petrol operator moved to offload 25 freehold petrol stations, the first of 50 across the country as part of its divestment strategy.

“Caltex is focused on unlocking value in our portfolio for shareholders and the segmentation of our network following our Convenience Retail network review has allowed us to consider a range of options to release capital from our high-quality property assets,” Segal said.

In its trading update, Caltex said convenience Retail EBIT is expected to be in the range of $190 million and 210 million, representing an increase of $20 to 40 million over the first half of 2019, but lower than last years profit of $307 million.

“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," Segal said in the update.

Caltex reported a 54 per cent drop in benchmark profit for the June half, with all parts of the business hit by macro-economic conditions, including Australia’s slowing economy, and low refining margins.

Moody’s Investors Service views Caltex's proposed IPO as having no impact on the petrol giant’s credit rating, given the company’s strong financial profile and “track record of maintaining conservative credit metrics”.

Caltex said it has appointed UBS and Grant Samuel as financial advisers, UBS as lead manager in relation to the IPO, and Herbert Smith Freehills as legal adviser.

The proposed IPO is subject conditions and approvals, including ASX and final Caltex board approval.

If approved, the transaction is expected to complete in the first half of 2020.

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