Caltex waits to Mobilise

Caltex's Des King wasn't kidding when he said he expected that it would take "some months" for his proposed acquisition of just over half Mobil's retail network to obtain Australian Competition and Consumer Commission approval, or not. Graeme Samuel and his staff would view the deal with considerable concern.

While Woolworths was instantly out of the blocks to say that it was not party to, nor involved, in the proposed $300 million deal, and Caltex presented the acquisition as one that would allow it to better compete with the other major players, including Woolworths, the ACCC would be very wary of a deal that would increase the share of the market held by the companies involved in the two big supermarket/fuel alliances.

It would also be conscious that the acquisition of Mobil's company-controlled 302 outlets would give Caltex 22 per cent of the retail market and add to Caltex's existing leading position as a wholesaler of transport fuels. It has an overall wholesale market share of about a third of the market and close to 40 per cent of the market for petrol.

Caltex, of course, would argue that the deal would only bring its retail share into line with Coles Express and Woolworths, giving the three industry leaders matching 22 per cent shares, with BP holding 19 per cent. Mobil would retain a five per cent share if the deal obtains clearance – Caltex hasn't tried to push the deal, and the ACCC's tolerance, as hard as it might have.

Caltex also argues that it has the ability today to actually set the prices at service stations representing only about five per cent of the national market and that the Mobil deal would still only give it price-setting ability over 11 per cent of the market – it supplies and supports the rest of the Caltex-branded network but doesn't dictate pricing.

Whether or not Caltex keeps the Mobil service stations acquired ring-fenced from its relationship with Woolworths, the ACCC, independents and consumer groups will be concerned about the increasing dominance of the alliances of supermarkets and petrol companies.

It was Woolworths' push into petrol retailing and the tying of petrol discounts to groceries that started the transformation of the petrol marketing sector, forcing Coles to enter an alliance with Shell that gave Coles the core of Shell's retail network and Woolworths to respond by entering its own alliance with Caltex.

Those alliances have had far-reaching effects on the marketers without a tie-up with the grocery chains, independents and other grocery retails and no doubt played a significant role in Mobil's decision to sell its company-owned and leased sites. In effect the alliances have the ability to deliver petrol, if they wish, at prices below domestic terminal gate prices.

Their impact has been magnified by the introduction of cleaner fuel standards, which has made it more difficult for independents to competitively source petrol from offshore refineries.

If Caltex can get the deal past the ACCC it would be a low-risk and very complementary expansion in what is otherwise a relatively low-growth and low-margin business, providing a substantial increase in scale at a relatively modest cost and continuing the long-term consolidation of the industry which has seen Caltex emerge as the strongest integrated player.

It would also be a very positive note on which Des King could sign off on a very successful period as CEO as he heads back to Chevron in the US and hands over the business to former Incitec Pivot chief executive Julian Segal.