Brokers are picking the Commerce Commission will green-light Z Energy's proposed $785million purchase of the Chevron-owned Caltex network of New Zealand assets, but possibly with conditions attached.
The proposed acquisition dates back to early June last year.
The Commerce Commission in December delayed its decision, setting a deadline of April 29, just nine days away.
Should the deal go through, Z Energy would become by far the largest fuel retailer in the country, with an almost 50% market share.
Forsyth Barr broker Suzanne Kinnaird was picking that the commission was ‘‘more likely than not'' to clear the transaction. She predicted there would be conditions attached to the deal and the detail remained how much, if anything, the commission would force Z Energy to sell before allowing the deal to go ahead.
‘‘The key question is which parts of the merged business will Z Energy be forced to sell,'' she said.
In December, Z Energy agreed to a request from the Commerce Commission for a time extension to consider its application to buy Caltex.
The transaction costs for Z had continued at a rate of about $2million a month, with the December delay estimated to have added about $10million to the cost of the deal.
Mrs Kinnaird said the negative risk involved with the deal, with commission approval, was outweighed by the positives to come from the acquisition.
She said Z Energy was trading at $5.10 the day before it announced its takeover. It was trading up slightly at $6.93 yesterday.
Mrs Kinnaird said with Z Energy's share price up 35%, the market was already pricing in some of the positives which would come from the Caltex deal going ahead.
Since the proposal last June, the market had increased 12% and Forsyth Barr's full year 2016 forecast net profit after tax for Z Energy had increased 25%.‘‘Full year 2016 is going to be a good year for Z Energy,'' she said.
She said the negative risk to the current share price of the deal not being cleared was between -6% and -10%, while the positive potential was between +9% and +26%.
‘‘Factoring in our view that the deal is more likely than not going to get cleared, we retain our positive disposition to Z Energy,'' Mrs Kinnaird said.
Craigs Investment Partners broker Chris Timms similarly said it ‘‘appears likely'' approval would be granted by the Commerce Commission and the Overseas Investment Office.
‘‘This would increase Z Energy's market share from 28% to 49% and would result in cost synergies in the range of $15million to $25million per annum,'' he said.
Mr Timms said Z Energy had shown consistent growth during the past five years.
‘‘Industry margins have improved as key industry participants have asserted the need for a return on their investment in infrastructure and working capital,'' he said.
While overall industry volume growth was flat, with the continuation of the 35-year trend of declining petrol consumption and growing diesel consumption, Z Energy expected higher fuel margins to remain, Mr Timms said.
