Z Energy gets go-ahead to buy Chevron

A Caltex station (Getty)
A Caltex station (Getty)

Z Energy has been given the green light to purchase competitor Chevron, as long as it sells 19 of its service stations and one truck stop.

The Commerce Commission says the loss of Chevron, which operates the Caltex and Challenge brands, would "not substantially lessen competition".

"Chevron...has been a passive competitor in New Zealand and followed the lead of its rivals rather than taking an aggressive approach in its pricing," says commission chair Mark Berry.

"We consider, by majority, that subject to Z Energy divesting 19 retail sites, Chevron's absence would not make a material difference to the competitive dynamics we currently see, where retail price movements are dominated by Z, BP, Mobil and Gull."

The $785 million deal will give Z Energy 49 percent of the country's retail petrol market. The merger of the companies will become official on June 1, 2016. Only $115 million of the purchase will be funded by cash held by Z Energy, the rest by taking on debt.

Caltex and Challenge stations won't be rebranded.

Z Energy says more than 100 staff from both companies have worked on the deal.

"Bringing two large companies with different technology, systems, processes and business models together is a complex and challenging undertaking," says Z chief executive Mike Bennetts.

The merger is expected to save between $25 million and $30 million annually, by improving the efficiency of the supply chain and reduced back-office and IT costs.

"The expanded company will create value through leveraging the scale and scope of both companies' operations, including the diversity of business models and people expertise," says Mr Bennetts.

One of the four commissioners who looked at the proposal dissented, saying in some localised markets there is evidence petrol retailers are coordinating their pricing, which could "become more firmly entrenched" with Chevron's absence.

For the deal to go ahead, Z Energy has to divest, or sell, 19 stations in areas which Chevron's absence could lessen competition. Three are in Northland, three in Waikato, three in Christchurch, four elsewhere in Canterbury, two in the upper South Island, and one in each of Auckland, Bay of Plenty, Wellington and Otago.

Just which stations in particular need to be divested hasn't been released, as Z Energy needs time to inform the staff and any independent station owners.

Z Energy and Chevron own the only truck stops in Kawerau, so Z Energy will need to sell theirs.

Z Energy says it has been approached by "numerous parties" interested in buying the stations.

Staff at Chevron have been given a commitment of at least 12 months employment from June 1 next year.

"[Chevron] already runs a lean and highly efficient operation and we expect to learn a lot from their people over the coming months," says Mr Bennetts.

Until settlement, the companies would operate as competitors. After June 1, 2016, Z Energy says it will be "very much business as usual" for customers, who "should notice no impact or change as a result".

The commission's full reasoning behind the decision will be released in May.


Contact Newshub with your story tips: