Will 1+1=3 for APL?

To buy or not to buy is no more a question for Attock Petroleum Limited (APL) board of directors. The spotlight has now shifted to what they get out of it, if they succeed in acquiring the local downstream business of the global giant Chevron.
What has set off Chevron Corporations plan to divest its retail business in Pakistan is its global strategy of exiting downstream business in Australia, Pakistan and Egypt.
The decision is in line with the global trend of major integrated oil and gas companies warding off their refining, marketing and retail businesses to focus on the high risk/high reward E&P sector.
From the look of things, the acquisition of the fourth largest oil retailer in the country by the third largest seems to settle well under the synergy creation mantra.
Recall that the deal includes:
(a) Complete acquisition of Chevron Pakistan Limited excluding its lube segment;
(b) 12 percent shareholding in Pakistan Refinery Limited; and
(c) 11 percent stake in cross country oil pipeline.
The Companys cash rich balance sheet will be adorned with Chevrons over 500 retail outlets.
With Chevrons retail and storage presence in Sindh, its not a stretch to think that APL will amass an additional five to six percent of Chevron to its existing nine percent market share (as of FY12).
No doubt that the deal, if it turns out in favour of APL, will generate group level synergies making APL much more comparable with PSO and Shell.
That said, achieving synergy is easier said than done. In practice, things can go awry, especially with other strong contenders swarming towards Chevrons jewels.
It has been relatively dull at APL since the beginning of FY13. The market believes that in case APL loses out, it should be prepared for some hefty payouts!