The Caltex Australia Limited (ASX: CTX) share price has been a strong performer on Thursday after the ACCC advised that it intends to oppose the proposed acquisition by BP Australia of the network of retail service station sites owned by Woolworths Limited (ASX: WOW).
At the time of writing the Caltex share price is almost 5% higher at $35.13, whereas the Woolworths share price is down over 1% to $26.71.
Why is the ACCC opposed to it?
According to its release, the ACCC believes that BP acquiring Woolworths' service stations would substantially lessen competition in the retail supply of fuel.
Chairman Rod Sims stated that: "Woolworths is a vigorous and effective competitor which has an important influence on fuel prices and price cycles in many markets throughout the country. Many consumers seeking out cheaper petrol will head to Woolworths petrol stations."
Before adding that: "We believe that fuel prices will likely increase at the Woolworths sites if BP acquires them and other retailers would then face less competitive pressure. The bottom line is that we consider motorists will end up paying more, regardless of where they buy fuel, if this acquisition goes ahead."
Today's decision appears to be a win for both consumers and Caltex which supplies many of the Woolworths service stations. Caltex was likely to lose its fuel supply contract with Woolworths if the acquisition had gone ahead as planned.
Should you invest in Caltex shares?
Prior to this decision I felt that Caltex would be a good option for investors in 2018 due to the improving outlook for oil prices, so today's decision is a big positive.
I'm not the only one bullish on the fuel retailer. Both Deutsche Bank and Citi have buy ratings on its shares at the moment with price targets of $36.15 and $37.66, respectively. These price targets were set prior to this announcement, so I would not be surprised to see them revised higher next week when the dust settles.
