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Z sees greater benefits from Chevron acquisition

Published: Wed 23 Sep 2015 09:12 AM
Z sees greater benefits from Chevron acquisition, affirms annual guidance
By Paul McBeth
Sept. 23 (BusinessDesk) - Z Energy, the service station chain, expects greater benefits than previously forecast from its proposed acquisition of Chevron New Zealand's service stations and says it is running on schedule to integrate the business if it gets approval from the antitrust regulator. Separately, Z affirmed its annual guidance.
Wellington-based Z sees annual savings of between $25 million and $30 million from acquiring the Chevron assets, up from earlier estimates of $15 million to $25 million, it said in a statement. The company also lowered the forecast cost of acquiring the Caltex and Challenge! branded chains to $55 million from $64 million, while saying any delay in the Nov. 30 cut-over date would add an extra $2 million a month.
"It would appear to us that CNZ (Chevron New Zealand) has benefited from a strengthened operating performance during calendar 2015," chief executive Mike Bennetts said. "Accordingly, Z now expects that the financial performance of CNZ is stronger than our initial assessment at the time of announcing the proposed acquisition."
The acquisition is currently in the hands of the Commerce Commission, which is reviewing whether Z’s $785 million acquisition of the Chevron New Zealand network, giving it 49 percent of the retail market, would substantially lessen competition.
Rival Mobil Oil New Zealand has submitted the merger would concentrate fuel discount arrangements, while discount retailer Gull New Zealand was concerned over the long-term commercial contracts the enlarged group would be able to command. BP New Zealand warned competition issues would arise in more areas than claimed and recommended Z be forced to divest stations in those locations.
Z today said the process is proceeding as planned, and was confident the transaction won't substantially lessen competition. The regulator has indicated it will make a decision on Dec. 18.
Separately, the company affirmed annual replacement cost operating earnings before interest, tax, depreciation, amortisation and fair value movements to be within $245 million and $265 million. That guidance includes a one-off $24 million charge from additional Customs duties and penalties, and the timing of the Chevron cut-over date, which Z said was "effectively increasing guidance by maintaining the current range."
The shares last traded at $6.13 and have gained 32 percent this year.
(BusinessDesk)
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