Ampol, the Australian company that owns discount retailer Gull, has made a conditional offer to buy Z Energy, New Zealand's largest fuel retailer, valuing it at $3.78 a share.
The non-binding offer is contingent on a range approvals, including the High Court, Overseas Investment Office, Z Energy's shareholders and, arguably the most difficult, the Commerce Commission.
Ampol has already flagged that it is prepared to sell Gull if it has to do so in order to gain approval from the Commerce Commission.
Z Energy revealed on Monday that it was the fourth offer Ampol had made in recent months, having earlier made approaches at $3.35, $3.50 and $3.60.
While NZX-listed Z Energy's response does not suggest it is ready to endorse the deal, it has agreed to a period of exclusivity to allow Ampol to conduct due diligence.
"At this point in time, we're not recommending it to shareholders," Z Energy's chief executive, Mike Bennetts, told the Herald.
"What we've said is, it's enough to grant them the opportunity to do DD [due diligence] and to revise their offer and it also gives us the chance to understand their confidence and approach to securing those regulatory approvals."
While Bennetts refused to describe what it might take to get Z Energy's board to approve the offer, he indicated part of the issue was how long it could take to settle and the fact that the offer included restrictions on the level of dividends the company could pay in the mean time.
The fact that Ampol had indicated it might be prepared to sell Gull showed the potential buyer was credible. "They are very serious in their offer," Bennetts said, however "it's not at a level yet that Z's board would recommend it, so there's more work to be done."
Earlier reports from across the Tasman described the offer as being "$2.5 billion odd", but the offer implies a market capitalisation for Z Energy of a little under $2b.
When Z Energy's shares resumed trading after a trading hold they immediately jumped 18 per cent to $3.60.
Z Energy has been subject of persistent takeover rumours across the Tasman, with the talk ramping up after the recent vote to close down the refinery at Marsden Point and turn it into an import only terminal.
The AFR's Street Talk column this morning said Ampol and Z Energy have been in advanced talks about the takeover proposal for weeks, and have even held discussions about Ampol seeking a secondary listing of its shares on New Zealand's NZX.
Ampol is best known in Australia for its petrol stations but also has a significant international trading business. Gull has about 100 mostly unmanned fuel retail sites.
Ampol said the offer represented a premium of 35 per cent to July 26, "which is the day prior to first press speculation in relation to corporate activity involving Z Energy".
It is a premium of around 24 per cent to Z Energy's closing price on Friday.
If the deal was to go ahead, it would be done by way of a scheme of arrangement, which would require the approval of the Z Energy board of directors.
Its statement to the NZX did not make it clear whether the board was likely to recommend shareholders a $3.78 offer if the offer became binding.
"The Z Energy Board has stated that it is in its shareholders' best interests to grant Ampol a four-week period of exclusivity for it to undertake confirmatory due diligence enquiries and to agree terms on a Scheme Implementation Agreement," Z Energy said in a statement.
Ampol said its offer was a "compelling value proposition for Z Energy shareholders".
It includes a provision for Z Energy to pay a dividend if the transaction is ongoing but not completed by March the end of 2022, while Ampol has also raised the possibility to making some of the payment in Ampol shares.
"Z Energy is a logical growth opportunity for Ampol as both companies are market leaders in their respective home markets and have very similar business models, Ampol chief executive Matt Halliday said in a statement.
"A successful acquisition would create [a trans-Tasman] leader in fuel, with significant regional scale and trusted and iconic brands on both sides of the Tasman."
Ampol said it had invested $80 million in New Zealand since 2016 and "has a strong track record of reliably delivering transport fuels".
The company claimed it would maintain energy security and support industry, as it hyped its moves to decarbonise the fuel market.
"Given the ongoing work of both organisations in energy transition, a combined entity would provide a new, larger platform, supporting the development of lower emissions energy solutions for customers across Australia and New Zealand."
It would sell part of the business if it had to.
"As part of the New Zealand Commerce Act clearance process, Ampol intends committing to a material divestment to ensure any potential competition law issues are fully addressed as a result of the transaction (this may include a full divestment of Gull)."