Rubicon fills its coffers with Challenge sale

By PAULA OLIVER energy writer

Rubicon chiefs were last night celebrating a hefty profit from the sale of the Challenge petrol station network to oil giant Caltex.

Under the deal, revealed minutes after Commerce Commission clearance, Rubicon will sell the network for net cash proceeds of $50 million.

After acquiring Challenge and a Brisbane bulk-fuel terminal for a combined total of $20 million, Rubicon has now sold them for $73 million - a result for shareholders that chief executive Luke Moriarty last night described as outstanding.

The sale of Challenge, which Mr Moriarty said happened very quickly, completes Rubicon's exit from the petroleum assets inherited as part of the separation of Fletcher Challenge.

Dogged by its image as a market ugly duckling with a diverse portfolio, Rubicon has embarked on an aggressive asset sale programme, and now holds only biotech and forestry assets.

Mr Moriarty also said Rubicon would raise its share buyback, aimed at lifting the share price, from $40 million to $60 million. Rubicon will issue details within a month.

"As we have already stated, we are very conscious of the discount to net asset backing at which Rubicon is currently trading," Mr Moriarty said.

Despite picking up the 119-station Challenge network, Caltex is likely to stay the smallest of the four major oil companies.

The Commerce Commission will require it to sell stations in areas where only Caltex and Challenge have retail sites and where the nearest competitor is at least 10km away.

Only two sites fit this description.

Commission chairman John Belgrave said there was intense competition in the industry, and new entrants such as Australia's Gull Petroleum ensured the buyout would not hurt competition.

Challenge was launched in 1998 as an independent, discount alternative. It settled at about 5 per cent market share. Caltex holds 17 per cent.

Caltex's general manager of manufacturing and supply, Peter Logan, said last night that the Challenge brand would be kept as a discount brand. That meant possible price differences.

Challenge general manager Bob Constantine said he was pleased that Caltex would continue to support the Challenge brand. The 100 independent station owners now had stronger and more certain prospects, he said.

The Commerce Commission's decision to clear the purchase was one of a number issued yesterday, after a High Court ruling on Wednesday endorsed the commission's methods of evaluating recent applications.

Foodstuffs, which had challenged the commission's methods in light of new merger and acquisition laws, said it might appeal against the ruling. But that did not stop the commission releasing a bottleneck of decisions, including clearance for:

* Computershare Registry Services to acquire BT Portfolio Services.

* Howard Smith to acquire OPSM Protector's Protector Supply Group.

* State-owned miner Solid Energy to acquire Todd Coal's Spring Creek mine, near Greymouth.

A decision is expected tomorrow on Carter Holt Harvey's application for clearance to buy the Central North Island Forestry Partnership. Progressive Enterprises' application to buy Woolworths group is expected to be decided on July 6.