Infratil and the NZ Superannuation fund are in the home straight in their bid to buy assets of Shell.
The three parties have signed a letter of intent which they say is not an acquisition contract but represents a clear intention to proceed with the deal. Besides other assets, Infratil and the fund are in line to buy 229 service stations and Shell New Zealand's 17.1 per cent stake in New Zealand Refining. The deal is expected to be signed in early 2010.
"It's a signal that things are on track and there's a clear intention it will be proceeded with once all the I-s are dotted and the T-s are crossed," a NZ Super fund spokesman said.
It was a complex deal with a number of parties involved and issues such as supply agreements needed to be finalised, he said.
Market speculation has put Shell's assets on sale at between $700 million to $1 billion. The spokesman said there would be no announcement on price until the deal had been signed. "A price has been agreed on."
The fund does not have to sell out of other investments to fund its share of the deal. Shell is also selling a 25 per cent holding in the operator of Flybuys and its aviation, bitumen, chemicals, commercial fuel, distribution and supply and marine business.
Infratil has said it would drop the distinctive red and yellow Pecten emblem as part of a rebranding exercise. Analysts from McDouall Stuart say keeping the Shell brand would have required a hefty franchising fee and changing it gave Infratil the chance to play the "Kiwi card" and play on patriotic loyalty given the three other majors and Gull are foreign-owned.
"However, given that fuel is essentially a commodity, store location and convenience are likely to big factors in consumer choice."
McDouall Stuart says in its regular newsletter that while Shell has the highest fuel volumes per site in the industry, its convenience retailing is viewed as being weak, giving Infratil a chance to add value.
In another deal, bids for Exxon Mobil's 19 per cent stake in NZ Refining and about 170 service stations are believed to have closed. A private equity group and another potential buyer, with industry experience, are understood to be in the running.