Z Energy is to acquire Caltex New Zealand for a reported $785 million.
Z Energy has about 27 per cent of the fuel market and combined with Caltex and their supplies to Challenge stations, its share would reach 49 per cent. Z said it would continue with the Caltex brand.
While the local financial markets reacted positively to the news, the fuel industry and consumer organizations like the AA reacted negatively to the fact the new entity would have nearly 50% market share within New Zealand. Local analyst said the Z deal would leave the market dominated by the three big players, Z, BP and Mobil with a combined share of around 90 per cent.
It appears to make sense locally and Mike Bennett has spoken about "synergy benefits" of between $15m and $25m a year from the deal from 2017 onwards. Z Energy is expecting to close the deal before the end of the year. In the meantime, we will have to wait and see what the competition authorities will do.
PetrolWorld believes that it is a strange deal from an international perspective. New Zealand is a small market and this is a big acquisition in relation to the value of the deal. If you look at Copec in Chile or DCC in Ireland which are also based in small countries, they had the foresight and ability to expand internationally. In recent years, all around the world, it has been a trend for independent fuel wholesalers and retailers to expand outside of their ‘small market’ area countries to much bigger ones. PetrolWorld 030615