IPOs and Catalysts/Events, Global Equity Research Ltd

Arun George

Arun has over 15 years’ experience covering the Technology sector. During this time, he has worked with technology start-ups and as an equity analyst in investment banks and independent research firms. He was formerly a Technology Analyst for Canaccord Genuity, Altium Securities, Espirito Santo Investment Bank, Noble Group and Clear Capital. He has a dual Master’s degree in Financial Engineering and Industrial and Operations Engineering from the University of Michigan. He obtained his Bachelor’s degree in Mechanical Engineering from the Indian Institute of Technology, Bombay. He is also a CFA charterholder.

IPOs and Catalysts/Events

Ampol Enters a Binding SIA to Acquire Z Energy

Z Energy Scheme Meeting on 25 March, IE Opinion

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Event-Driven

<a href="https://www.smartkarma.com/entities/z-energy-ltd" target="_blank" data-smartkarma-citation="entities:9838:1" rel="noopener">Z Energy Ltd (ZEL NZ)</a> is a fuel distribution and retailing business which owns and manages over 300 fuel stations in New Zealand under the Z and Caltex brands. Z Energy revealed a non-binding indicative proposal from <a href="https://www.smartkarma.com/entities/ampol-ltd" target="_blank" data-smartkarma-citation="entities:345:1" rel="noopener">Caltex Australia (ALD AU)</a>/Ampol to acquire it via a scheme of arrangement. Ampol is offering NZ$3.78 per share. The bid represents a 22% premium to the share price on 12 August (prior to receipt of the announced proposal), a 35% premium to the share price on 26 July (prior to media speculation regarding a bid) and a 47% premium to the share price on 1 June (prior to Ampol’s first rejected proposal).Z Energy has agreed to grant Ampol a four-week exclusivity period to conduct due diligence. The indicative offer permits Z Energy to pay dividends up to NZ 10 cents on the scheme implementation to accommodate any regulatory-driven delays. Subject to discussions, Ampol’s offer may include a scrip component and a secondary New Zealand listing.  Pushing for a better price is part of the M&amp;A game. The Board had rejected Ampol’s previous three offers as they did not represent compelling value. The Board was able to secure a sweetened bid which offers a 12.8% bump to Ampol’s first offer of NZ$3.35 per share.  Ampol’s offer is a premium to Z Energy's historical EV/EBITDA multiples but a discount to pre-COVID-19 share prices. Z Energy’s CEO opines that Ampol’s bid could be a catalyst for other bidders that had previously signalled interest to make a move for Z Energy. Potential bidders could be <a href="https://www.smartkarma.com/entities/chevron-corp" target="_blank" data-smartkarma-citation="entities:11091:1" rel="noopener">Chevron Corp (CVX US)</a>, Vitol, <a href="https://www.smartkarma.com/entities/glencore-plc" target="_blank" data-smartkarma-citation="entities:764:1" rel="noopener">Glencore Plc (GLEN LN)</a>, Trafigura and Japanese refiners.<div class="content-highlight">Overall, we think Ampol’s offer is a good starting point to lay down a valuation benchmark and suspect that there is some upside to the final offer price. At the last close price of NZ$3.48, Z Energy’s shares are trading at an 8.6% gross spread to the indicative offer.</div>

Z Energy Ltd (ZEL NZ) is a fuel distribution and retailing business which owns and manages over 300 fuel stations in New Zealand under the Z and Caltex brands. Z Energy revealed a non-binding indicative proposal from Caltex Australia (ALD AU)/Ampol to acquire it via a scheme of arrangement. Ampol is offering NZ$3.78 per share. The bid represents a 22% premium to the share price on 12 August (prior to receipt of the announced proposal), a 35% premium to the share price on 26 July (prior to media speculation regarding a bid) and a 47% premium to the share price on 1 June (prior to Ampol’s first rejected proposal).Z Energy has agreed to grant Ampol a four-week exclusivity period to conduct due diligence. The indicative offer permits Z Energy to pay dividends up to NZ 10 cents on the scheme implementation to accommodate any regulatory-driven delays. Subject to discussions, Ampol’s offer may include a scrip component and a secondary New Zealand listing.  Pushing for a better price is part of the M&amp;A game. The Board had rejected Ampol’s previous three offers as they did not represent compelling value. The Board was able to secure a sweetened bid which offers a 12.8% bump to Ampol’s first offer of NZ$3.35 per share.  Ampol’s offer is a premium to Z Energy's historical EV/EBITDA multiples but a discount to pre-COVID-19 share prices. Z Energy’s CEO opines that Ampol’s bid could be a catalyst for other bidders that had previously signalled interest to make a move for Z Energy. Potential bidders could be Chevron Corp (CVX US), Vitol, Glencore Plc (GLEN LN), Trafigura and Japanese refiners.Overall, we think Ampol’s offer is a good starting point to lay down a valuation benchmark and suspect that there is some upside to the final offer price. At the last close price of NZ$3.48, Z Energy’s shares are trading at an 8.6% gross spread to the indicative offer.

Z Energy Ltd

Ampol Lobs an Offer for Z Energy