Business

Z Energy confident Caltex deal will get nod

14:17 pm on 3 June 2015

Z Energy is confident its bid to buy rival Caltex for $785 million will be approved by regulators.

Z Energy's shares jumped more than a fifth yesterday, by $1.10 to $6.20 each, with the proposed deal giving the company a combined 49 percent of the transport fuel market.

Permission from the Commerce Commission and the Overseas Investment Office (OIO) will be needed first.

Forsyth Barr senior equities analyst Andrew Harvey-Green said the commission would be the tougher of the regulators to overcome.

"The OIO shouldn't have too many issues, given it's a predominately New Zealand business and Chevron NZ is a 100 percent offshore-owned business.

"The Commerce Commission is a little more uncertain, but Z Energy is reasonably confident of getting through."

AA market analyst Mark Stockdale said there was a risk motorists would become hostage to less competition and higher prices.

In the past, Z Energy has spoken openly of the industry's need to lift margins to remain profitable and reinvest in ageing infrastructure.

Z Energy CEO Mike Bennetts said the company would meet the Commerce Commission's test that competition would not be substantially reduced.

"We think that's backed up by really good analysis and we look forward to working with the commission to make sure we can inform them about all the facts and data about our industry so they can reach their own conclusion."

Mr Bennetts said he expected the deal to be completed by the end of the year.

The deal with Caltex owner Chevron includes Caltex's 146 petrol stations and 73 truck stops, Chevron's lubricant business and fuel supplies to Challenge's 90 garages.

The deal will be funded by a mixture of cash and debt, while Z Energy will raise money from investors.