The bid was at $32 a share, or about a 25 per cent premium to the then trading price, and valued Caltex at about $9.25 billion including debt.
While the premium was fairly typical of an initial approach, Couche-Tard left room for some extra upside.
The bid could also include a special dividend, to be declared and paid by Caltex, that would finally make use of the franking credit pile.
While franking credits have different value in the hands of different investors, it’s understood Couche-Tard said its offer could be worth significantly more than $32 a share in the hands of the right investors.
Importantly, it was also a clean way Caltex could make use of its ever-building warchest and unlock value.
Caltex rejected the approach as undervaluing the company.
Couche-Tard returned with an indicative cash offer at $34.50, as disclosed by Caltex on Tuesday morning following Street Talk’s revealations it was in the cross hairs of the Canadian company.
Caltex said the updated proposal would allow it to pay a special dividend. It also said the offer was $34.50 a share less any dividends declared by the company.
The proposal was subject to a handful of conditions, including no material divestments. Caltex’s proposed property IPO, announced on Monday, would be considered a material divestment.
Caltex shares were up 12.3 per cent to $33.46 on Tuesday morning.
UBS and Grant Samuel are advising Caltex. Goldman Sachs is advising Couche-Tard.