BP set to be fuel and convenience giant

Marty Silk
(Australian Associated Press)

BP will become one of Australia’s largest fuel and convenience retailers following a $1.79 billion deal to buy Woolworths’ petrol stations business.

Woolworths has agreed to sell it 527 fuel convenience stores plus 16 development sites to BP, which owns 350 retail sites in Australia and supplies a further 1,050 BP-branded sites.

With plans to roll out up to 200 new format “Metro at BP” convenience stores under the deal, BP will rival Caltex and Shell-owner Viva Energy in the fuel convenience store market.

The deal could also take BP’s retail fuel market share up to a dominant 37 per cent – based on 2014 Australian Competition and Consumer Commission figures which show Woolworths with 24 per cent of the market and BP with 13 per cent.

The same figures show Coles Express has 24 per cent and Caltex has 18 per cent.

Approval from the ACCC and the Foreign Investment Review Board will be needed for the deal to proceed.

Under the agreement, announced by Woolworths on Wednesday, BP will retain Woolworths’ four cents per litre fuel discount offer for at least 10 years.

Both parties will jointly fund the discount, which cost Woolies $70 million in 2015/16.

Woolworths’ customer rewards programs will also be maintained and expanded to some BP outlets.

Woolworths chief executive Brad Banducci said the Metro at BP concept would be trialled and, if successful, rolled out across up to 200 current BP fuel convenience sites.

“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,” Mr Banducci said.

BP Australia President Andy Holmes said his company had succeeded with similar partnerships around the world, including with Marks & Spencer in the UK and REWE in Germany.

“This new partnership is great news for all Australian consumers, 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,” Mr Holmes said.

The deal with BP ends the ambitions of Caltex Australia, which had made an offer to buy the Woolworths service stations.

Caltex chief executive Julian Segal said he was “disappointed” that the 3.5 billion fuel supply arrangement with Woolworths would come to an end but said his group believed it had made a fair offer for the business.

“It is important that we exercise financial discipline in pursuing growth,” he said.

Woolworths does not expect any material impact from selling the fuel business, which had sales of $4.6 billion and earnings of $117.8 million in 2015/16.

It will use the sale proceeds to reduce debt and invest in its core supermarket business as it continues a turnaround following its $1.2 billion loss in 2015/16.

The sale is not expected to be completed before January 2, 2018, with existing Caltex-Woolworths sites continuing to operate in the interim.

Woolworths shares were up 2.2 per cent to $24.37 in afternoon trading while Caltex was 1.5 per cent lower at $30.15.

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