BP to Buy Woolworths Australian Gas Stations for A$1.785 Billion

Getty Images

The fuel sold at Woolworths' petrol stations is now supplied by Caltex Australia (CTX.AX), which also bid for the business. It is exiting its Masters hardware venture which is being wound up as it shrinks back to its core supermarket and Big W retail offering.

Each year, Woolworths' petrol stations sell around 4 billion litres of fuel, with earnings between $130 million and $150 million. As it had previously mentioned, Caltex had made a conditional and confidential proposal to Woolworths to acquire its fuels business and continue the successful fuel alliance (notably, Caltex's fuel supply arrangement with Woolworths is linked to Woolworths' ownership of the business), however, in the interests of shareholders, it was not willing to overpay for the business. Caltex was the exclusive supplier of petrol and diesel to Woolworths with annual sales volumes of 3.5 billion litres a year.

The deal would preserve Woolworths' fuel redemption scheme, and would also trial a joint convenience store business at 200 BP petrol stations.

Motorists will be able to earn Woolworths rewards points "on both fuel and in-store purchases at most BP sites in Australia" - with those Woolworths Points then being converted to Qantas Points at the standard rate of 2,000 Woolworths points for 870 Qantas Points.

However, before this deal can go ahead, it will need approval from the Australian Competition and Consumer Commission (ACCC), and this deal could take 12 months to complete.

The takeover of the Woolworths-Caltex service stations will see them rebranded as BP outlets and absorbed into the larger BP network, with BP becoming "a cornerstone partner in Woolworths' Everyday Rewards loyalty program" according to a statement issued by the petrol retailer.

The worse than expected loss was a stark contrast to the $2.146 billion profit of 2015.


BP Buys Woolworths Australian Gas Stations for $1.3 Billion

BP Plc will pay A$1.785 billion ($1.3 billion) for Woolworths Ltd.’s 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 Ltd., as well as 16 development sites, according to a statement Wednesday from Sydney-based supermarket owner Woolworths. BP already owns 350 retail locations across Australia and supplies fuel to an additional 1,000 outlets owned by independent business partners, according to a separate statement from 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 Plc in the U.K. and REWE in Germany. For Woolworths, the sale is part of Chief Executive Officer Brad Banducci’s strategy to reverse the supermarket chain’s declining fortunes. Since being named as CEO in February, Banducci has cut jobs, written off assets and slowed store openings, while sales at its Australian food division have started growing again.

Positive Deal

The sale is “positive at the margin” for Woolworths, according to Michael McCarthy, chief market strategist at Sydney-based CMC Markets Asia Pacific Pty. “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,” 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. Caltex Chief Executive Officer Julian Segal said in a statement 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.”

Bucking the Trend

The purchase by BP represents a departure from the trend of recent years that’s 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 percent were directly controlled by them, according to a report from the Australasian Convenience and Petroleum Marketers Association.
Woolworths shares climbed 2 percent to A$24.32 as of 12:05 p.m. Wednesday in Sydney. The stock is up 19 percent from the almost 10-year low it reached in July. Caltex slid 0.7 percent to A$30.39 and is down 19 percent this year. BP has risen 42 percent this year.

Completion of the transaction is not expected before Jan. 2, 2018, and is subject to regulatory approvals.


Drivers to get cheaper petrol after BP buys Woolworths' service stations for $1.8BILLION

Motorists could get cheaper petrol with supermarket giant Woolworths partnering with oil and gas multinational BP to create a new line of fuel convenience stores called Metro at BP.

Woolworths is selling 527 fuel convenience stores and 16 development sites to BP for $1.79 billion, knocking back a counter offer from Caltex.

The supermarket's four-cent-a-litre discount offer and rewards programs will be expanded to some BP stations, giving motorists more places to get cheaper petrol and collect points for airline tickets.

The Metro at BP concept will be trialed at several sites and could be expanded to 200 BP convenience stores.
BP will roll out the Woolworths Rewards program, which gives consumers fuel discounts and points towards Qantas airline tickets.

They will also get reward points on items bought at BP-branded service stations.

Woolworths chief executive Brad Banducci said customers could get cheaper petrol and food.

'It will result in Woolworths having a larger platform for our redemption and reward program, as well as providing us with a unique opportunity to partner with and draw on BP's success in rolling out market-leading convenience food offers globally,' he told the Australian Securities Exchange.

BP Australia president Andy Holmes said customers would have more opportunities to take advantage of Woolworths' four-cent-a-litre fuel discounts.

'This new partnership is great news for all Australian customers, who will in future be able to enjoy the combination of BP's premium fuels, a world-class convenience food offer and an enhanced loyalty program, including the expansion of Woolworths' four-cent-per-litre fuel discount offer,' he said.

The idea is modelled on similar BP partnerships with convenience store chains in Europe, including with Marks & Spencer in the UK and REWE in Germany.

The Australian Competition and Consumer Commission and the Foreign Investment Review Board need to approve of the deal.

It is expected to be completed in January, 2018, with Woolworths' existing Caltex co-branded sites continuing to operate until then.

Woolworths knocked back an offer from Caltex to buy their service stations.

Caltex chief executive Julian Segal saying he was 'naturally disappointed' its partnership had ended with Woolworths to supply them with fuel.

Share this post