BP will pay A$1.78 billion (Dh4.77) for Woolworths’ network of Australian gas stations in a deal that will cement the London-based oil company as one of the nation’s biggest fuel providers.
The British energy company will acquire 527 fuel outlets that are currently supplied by rival Caltex Australia, as well as 16 development sites, the Sydney-based supermarket owner Woolworths said. BP already owns 350 retail locations across Australia and supplies fuel to an additional 1,000 outlets owned by independent business partners, according to the oil company. BP and Woolworths also agreed to a partnership that includes the continuation and expansion of a scheme providing fuel discounts for supermarket customers.
BP has previously struck deals with retailers including Marks & Spencer in the United Kingdom and REWE in Germany. For Woolworths, the sale is part of the chief executive’s Brad Banducci’s strategy to reverse the supermarket chain’s declining fortunes. Since being named as chief in February, Mr Banducci has cut jobs, written off assets and slowed store openings, while sales at its Australian food division have started growing again.
The sale is “positive at the margin” for Woolworths, according to Michael McCarthy, the chief market strategist at Sydney-based CMC Markets Asia Pacific. “Woolworths’ management were just keen to do any deal. While it is good that there’s movement, this was probably the easiest to do and probably the one that makes the least difference.”
BP’s proposal met Woolworths’ “strategic and broader commercial imperatives”. Mr Banducci said. The proceeds will be reinvested in Woolworths’ main business and the deal isn’t expected to have a material impact on earnings, the company said.
Caltex, which has been the exclusive supplier of petrol and diesel to the Woolworths outlets, had also expressed an interest in purchasing the business. The Caltex chief executive Julian Segal said that while the Sydney-based refiner and distributor is “disappointed that the successful fuel alliance will come to an end, it is important that we exercise financial discipline in pursuing growth”.
The purchase by BP represents a departure from the trend of recent years that has seen a smaller proportion of Australia’s retail fuel operators being owned by major oil companies. There are about 6,400 outlets Down Under and while about 52 percent were affiliated with one of the four major oil companies operating ion Australia as of January this year, only 9 per cent were directly controlled by them, according to a report from the Australasian Convenience and Petroleum Marketers Association.
Woolworths stock is up 19 per cent from the almost 10-year low it reached in July. Caltex is down 19 per cent this year. BP has risen 42 per cent this year.
Completion of the transaction is not expected before January 2, 2018, and is subject to regulatory approvals.
* Bloomberg
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