Z Energy shares jumped 11% to $7.90 after the Commerce Commission approved its bid to buy rival Caltex and Challenge! Petrol station chains.
The share price rise values the company at $3.2 billion according to BusinessDesk.
The Commerce Commission says price coordination at some locations wasn’t enough to turn it down, but that region where Gull stations operate are more competitive.
The 3:1 majority decision on the $785 million deal took more than ten months and gives Z about 49% of the retail transport fuels market.
Z will buy the ‘downstream’ assets of American oil giant Chevron, which is exiting all but its exploration activities in New Zealand.
The Z clearance includes an undertaking to sell 19 sites and one truck-stop. This includes Retail sites in Northland (3), Auckland (1), Waikato (3), Bay of Plenty (1), and Wellington (1)
As well as the top of the South Island (2), Christchurch (3), Canterbury outside Christchurch (4), and one in Otago, with a truck stop in Kawerau also to be sold.
Salt Funds Management managing director Matt Goodson told BusinessDesk the deal is good for Z but bad for consumers.
“It certainly wasn’t priced as 100% guaranteed to happen, there’s obviously been a move, and it also appears the Caltex NZ business is travelling a little better than the previous numbers,” says Goodson.
“It’s certainly a major win for some accomplished management at Z Energy, and a significant loss for the New Zealand consumer given the very sharp movement in petrol margins in recent years and the fact that massive vertical integration remains in place.”
Commission chair Mark Berry told a briefing in Auckland that most of the panel felt Caltex had “simply been a price follower” meaning its exit wouldn’t materially change the dynamics of the market in respect of price coordination, but accepted there was coordination happening in some instances and some local markets.
“The pattern of coordination is perhaps more evident outside the areas where Gull is present,” says Berry. “What we see are different is pricing patterns through the country and the dynamic impact of Gull is clearly to be seen on the market. Outside of that, we get greater parity of prices.”
Berry emphasised the commission had not seen any evidence of price collusion from petrol chains. The majority view held that it wasn’t the commission’s role to determine all the impacts of price coordination.
Berry said the majority view was the prospect of another bid for the Chevron assets was remote. He couldn’t disclose exactly which petrol stations for reasons of confidentiality.
Z currently owns some 200 service stations while Caltex has 150 sites.
