BP to buy Woolworths retail outlets in Australia for $1.8 billion (Aus.)

BP PLC has purchased Australian retailer Woolworths’ national chain of retail outlets for $1.8 billion (Aus.). The deal includes 527 fuel convenience sites and 16 development sites around Australia.

Woolworths has previously been supplied by Caltex Australia, a company that was also in talks to buy the outlets outright.

Once the deal is completed in the next 12 months, Caltex’s market share in Australia will slip to about 18% while BP, which already has 15% on its own brand name, will rise to 39% overall and be a clear market leader.

An important part of the deal involves the operation of convenience stores at the outlets. BP will trial the Woolworths Metro format at its own service stations before committing to roll it out across the chain.

The BP-Woolworths deal requires approval from the Foreign Investment Review Board and the Australian Competition and Consumer Commission (ACCC). Given the new BP dominance, some analysts tip that the ACCC will tell BP to divest some of the stations to third parties.

The Woolworths fuel business has a revenue of about $4.6 billion (Aus.)/year, which led to a pretax profit of $117 million in the 2015-16 financial year.

Woolworths is in need of the cash from the sale to reduce debt. The company is attempting to streamline its operations to try to revive declining earnings.

Caltex will continue to supply the Woolworths retail outlets until the BP deal is completed. Caltex has launched two acquisitions of its own in the last few months: Victorian retailer Milemaker Petroleum for $95 million (Aus.) and Gull New Zealand for $340 million (NZ).

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