Singapore sovereign wealth fund buys stake in Ampol property trust

Ampol Limited (ASX:ALD), formerly Caltex Australia, has spun off half of its service station properties into a property trust valued at AUD1.4 billion (USD1.0 billion) to pay down debt. Singapore’s sovereign wealth fund GIC and Charter Hall Group will jointly acquire a 49% minority interest in the property trust for AUD682 million (USD490 million).  Charter Hall, an Australian property fund manager known for its expansive ambition and active deal-making, will take a 5% stake.

Matt Halliday, Ampol’s managing director and CEO, said “Following the completion of our retail network review in 2019, we identified the opportunity to unlock the value of our high-quality retail property assets through a transaction that would demonstrate value, whilst importantly allowing Ampol to retain strategic and operational control over our core convenience retail network.

“Today’s announcement was made possible by the significant amount of work undertaken over the past year and represents the successful execution of the strategy communicated to the market in late 2019. The transaction represents compelling value in volatile market conditions.”

Transaction Overview

Upon completion of the transaction, Ampol will hold a 51% controlling interest in the property trust and maintain strategic and operational control of the core convenience retail sites. All sites held within the property trust will be leased back to Ampol under long-term triple net lease arrangements. The leases will have a weighted average lease expiry of 19.2 years, with multiple options for lease extensions at Ampol’s election.

The property trust will initially hold 203 core freehold convenience retail sites and Ampol will continue to progress opportunities to unlock value from additional freehold sites as market conditions improve.

The property trust will provide Ampol a platform to potentially acquire future sites and sell additional Ampol sites into the property trust over time. The property trust will also provide capex for site development and upgrades that meet relevant parameters.

The unlisted property trust will receive approximately AUD77 million (USD55.4 million) in rental payments from Ampol in the first year.

Ampol expects to receive net proceeds of approximately AUD612 million (USD440 million) after taxes, stamp duty and other costs. Given current uncertainty around Covid-19, the proceeds will be used initially to reduce leverage in line with Ampol’s Capital Allocation Framework.

The transaction is expected to complete by the end of 2020, subject to a number of conditions precedent being satisfied.

In related news, Ampol has unveiled new premium fuels brand Amplify, in partnership with the Red Bull Holden Racing Team.

The Red Bull Holden Racing Team celebrated the launch of Amplify by updating car livery and race suits in time for the Virgin Australia Supercars Championship event in Darwin over the weekend. The cars featured both the modernised Ampol logo, with the leaning ‘A’ representing the company’s forward momentum, and the new Amplify Premium Fuels brand, replacing the Caltex brand.

Halliday said that Amplify brings to life the company’s longstanding experience developing a broad range of premium fuels tailored to local conditions.

“Ampol’s knowledge and experience in fuel technology and global sourcing is unparalleled in the Australian market and the new Amplify brand and partnership with the Red Bull Holden Racing Team captures and celebrates our continued commitment to deliver the world’s best fuels technologies and high performance for all customers.”

The Amplify premium fuels brand will launch at the first Ampol pilot stores which open this month in Granville and Concord NSW, with more than 1,900 sites to transition to the Ampol and Amplify brands over the next two years.