A Canadian multinational operator of convenience stores, Alimentation Couche-Tard Inc. or Couche-Tard has dropped the buyout deal of an Australian petrol station operator, Caltex Australia Ltd. or Caltex that was worth $5.6 billion. This deal has become the latest victim of the coronavirus outbreak, which forced several governments to impose restrictions on air travel and grounded many airline companies across the globe.
Couche-Tard Buyout Cancelled
The $5.6 billion deal between Couche-Tard and Caltex was the biggest buyout deal that had ever been canceled by the virus impact since the Australian petroleum company suffered deeply due to the virus pandemic. Global oil price was sharply affected and hence declined significantly due to the imposition of travel restrictions and people’s movements in a bid to contain the spread of COVID-19, the disease caused by the new coronavirus.
The Australian oil company, as a key supplier of jet fuel, had been hit badly due to the sharp decline in air travel demands and grounded flight services across the globe due to the virus outbreak. Caltex has also decided on the scheduled shutdown of its Lytton refinery till May, with an aim to start reopening it only when pressure on profit margins ease.
Couche-Tard, which claimed to have secured funding commitments for the deal, however, shared a view that it still believed Caltex as a good company and was fit for the expansion into Asia. The Canadian company reaffirmed that it would be willing to re-engage with the Sydney-based company once the trend of coronavirus gets better.
Coronavirus Impact on Caltex
Amid the uncertainties of the virus impact, Caltex was looking for deferring capital spending and reviewing fixed costs while saying that its day-to-day spending requirements should be lower given the fall in crude oil prices. According to Reuters, “The Sydney-based firm has A$2.7 billion in debt facilities, of which A$1.4 billion is in cash and undrawn facilities.”
Citing to prioritize safeguarding its own business, Brian Hannasch, chief executive officer of Couche-Tard, said in a statement, “Our current plan would be to re-engage the process once there is sufficient clarity as to the global outlook, and the work done to date should mean that we will be able to quickly formalize our proposal at that time.”
In a separate statement, Caltex’s Chairman Steven Gregg said, “We remain confident in the strength of Caltex as an independent business, and should we receive an approach in the future would be willing to consider it on its merits.” Following the news, shares of Caltex were trading nearly 40% lower than Couche-Tard’s last offer price of A$35.25 a share. On Monday, the stock of Caltex was down as much as 9.1% by midday, versus a broader market decline of 1.3% of Couche-Tard.
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