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Woolworths sells fuel business to BP for nearly $1.8b

Wednesday, 28 Dec 2016 07:17:24 | Thuy Ong

The deal includes Woolworths' 527 fuel convenience sites and 16 development sites. (ABC News: Graeme Powell)

Woolworths will sell its fuel business to BP for nearly $1.8 billion, months after the company said it had received indicative proposals from several parties.

The deal includes its 527 fuel convenience sites and 16 development sites.

Woolworths had been mulling over a potential sale of its fuel business for some time as the company has been under pressure to preserve capital after its failed home improvement venture Masters saw it post a loss of $1.2 billion in its full year results in August, while petrol and food sales also slumped.

"The release of $1.785 billion from the sale will be used to strengthen our balance sheet and reinvest in our core businesses," Woolworths chief executive Brad Banducci said in a statement to the stock exchange.

"Following extensive evaluation of the proposals received, we decided that BP's proposal met our strategic and broader commercial imperatives and in its entirety provided superior long-term shareholder value."

Woolworth's fuel arm reported earnings before interest and tax and before significant items at $117.8 million in FY16.

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

The sale is still subject to regulatory approvals from the Australian Competition and Consumer Commission (ACCC) and the Foreign Investment Review Board (FIRB).

Woolworths said it did not expect the deal to be completed until January 2018 at the earliest.

Shares in Woolworths were up 1.8 per cent to a two-month high of $24.28 at 11:06am (AEDT)

Disappointment for Caltex

Caltex Australia had previously made a bid to buy Woolworths' fuel business, and said it had a 3.5-billion-litre fuel supply agreement with Woolworths linked to Woolworths' ownership of its fuel arm.

"Whilst we are naturally disappointed that the successful fuel alliance will come to an end, it is important we exercise financial discipline in pursuing growth. That growth must be in the best interests of Caltex shareholders," Caltex chief executive Julian Segal said in a statement.

Caltex said until the deal was completed it would continue to provide fuel supply to Woolworths.

Shares in Caltex fell 1.2 per cent to $30.25 by 11:05am (AEDT).

AustraliaPlus


 

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