Ampol shares soar on blockbuster EG Group deal
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The news: Fuel supplier Ampol was the best performing company on the ASX 200 in morning trade after agreeing to acquire EG Group Australia for $1.1 billion.
The numbers: Ampol shares were up 7.8% to $29.19 at 11:30am AEST, however the stock is down 7.7% over the last 12 months.
The cash and scrip deal will see Ampol pay $800 million in cash, funded from debt facilities, and $250 million in Ampol shares. Ampol also has the option to settle the equity component in cash, it said.
Ampol will acquire approximately 500 sites across Australia, with the company stating the deal will enable an estimated $65 million to $80 million in annual, post-integration synergies.
Ampol expects the deal, which remains subject to clearance by the competition regulator, to be "high single digit" accretive to earnings per share, and "double-digit" accretive to free cash flow per share. Ampol has proposed to divest around 20 sites as part of its application to the competition regulator.
The context: In an investor call on Thursday night, Ampol managing director Matt Halliday said the acquisition of EG Australia "marks a pivotal and highly strategic step forward for Ampol and is a logical next move in our journey to grow our fuel and convenience earnings".
Asked by Goldman Sachs analyst Henry Meyer about declining fuel sales in the EG business over the last few years, Halliday noted "three compelling reasons why we see some good upside in fuel volume".
These include Ampol's strategy for its fuel network and self-serve petrol stations U-GO, its ongoing partnership with Woolworths, and the execution of its card offer through its network.
The source: Ampol investor call transcript
