Z expect to save $30M with Caltex purchase

  • 25/05/2016
Z said it would fund the acquisitionof Chevron NZ through a mix of cash and bank debt (File)
Z said it would fund the acquisitionof Chevron NZ through a mix of cash and bank debt (File)

By Sophie Boot

Z Energy is confident of the savings it can make from the $785 million acquisition of Chevron New Zealand's Caltex and Challenge! petrol station chains, which it predicts will be up to $30 million.

In a statement, Z said it was confident in its previous guidance of between $25 million and $30 million in savings once the companies are integrated.

The company will update the market in the last week of every month until October as it works to smooth the acquisition, but said that until settlement occurs, Chevron remains a competitor and all actions it takes will be "planned and prepared for in such a way that the competitive integrity between the two companies is preserved at all times."

Z will provide operational data for the June quarter in mid-July, but said this would exclude Chevron data, with the first combined operational data released in October.

When announcing its full year results two weeks ago, Z said it would fund the acquisition, which will be settled on June 1, through a mix of cash and bank debt, and will undertake a retail bond issue to reduce the level of bank debt and replace a retail bond which will mature on October 15.

The timing of the bond is yet to be confirmed.

Z had net debt of $354 million for the year to March 31, up from $224 million a year earlier, which included a $79 million deposit for the Chevron acquisition.

It said the transaction would be financed by $115 million in cash, $705 million in additional debt, and the proceeds from selling 19 retail service stations and one truck stop to satisfy the Commerce Commission.

Z is buying Chevron's business with no core IT systems or processes, and said one of the most significant milestones will be transitioning Chevron's master file data and transactions into Z's system.

The shares fell 1.1 percent to $8.14.