Chevron exits Caltex and raises $3.6b

Demand was strong for the Australian petroleum refiner and distributor, with over 150 investors participating in the accelerated block.

US energy company Chevron raised A$4.7 billion ($3.6 billion) after offloading its 50% stake in Caltex Australia in one of the country’s largest ever block trades.  

In the long-anticipated share sale, Chevron sold 135 million shares at A$35 per share, a 7.6% discount to Friday’s close. There was a hard underwriting price of A$34.20 per unit, a 9.7% discount to the close, but strong demand allowed the issuer to push the price to A$35.

Goldman Sachs, the sole bookrunner, launched the deal on Friday at 5pm in Australia with no wall-cross process. Launching the deal blind had no negative impact on demand — some 45 minutes later, half of the book was covered by a range of cornerstone domestic and offshore institutional investors, and once the deal hit Bloomberg terminals, the rest of the book was covered two hours later, a source close to the deal told FinanceAsia.

The book build continued in the US and the UK, with demand coming in from long-only institutional investors and global funds Friday night. It priced Saturday morning Australia time. “Allocations to cornerstones were given priority, and everyone else was scaled back,” the source said, noting that the deal was “significantly oversubscribed”. According to some media reports, there was $10 billion worth of orders placed.

Geographically, Australian investors made up a large chunk of the book, although there was decent participation from the US and Europe as well. Over 150 investors purchased shares in Caltex, a petroleum refiner and distributor.

Despite the fact that the share sale has been long-anticipated, there was no overhang on the stock. Indeed, Caltex’s strong performance recently undoubtedly helped garner investor interest — shares have risen 71% in the past 12 months and are up 11% year-to-date. Caltex is currently trading at an estimated 2015 p/e of 19.67 times.

Chevron, which has been an investor in Caltex for over 40 years, has been cutting back investments in downstream refining to focus more on exploration and production. “This transaction reflects Chevron’s commitment to regulatory review our portfolio and generate cash to support our long-term priorities,” said Michael Wirth, Chevron’s executive vice president, downstream and chemicals.

The US oil company will continue to invest in Australia, with a number of plans in the pipeline, including two liquefied natural gas projects in the country.

“Asia Pacific is a core strategic focus for Chevron’s downstream business and we remain focused on ensuring our operations, portfolio and investments are well-positioned to meet the region’s growing demand for energy,” said Mark Nelson, president of international products, downstream and chemicals at Chevron. The company remains one of the largest overseas investors in Australia.

Speculation has mounted recently that Chevron would sell its stake in Caltex, particularly after Royal Dutch Shell sold down some of its stake in Woodside Petroleum last year.

Chevron is not alone in cutting downstream investments — last year Shell sold its Australian downstream business to Vitol, the Swiss commodities trading house, while BP has streamlined some of its Australian operations, according to media reports.

The Caltex block is the second largest in Australia since Telstra Corp raised $11.9 billion in November 2006, according to Dealogic data.

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