Published: Thu, December 29, 2016
Medical | By Ismael Lynch

Woolworths sells fuel business to BP for almost $1.8b

Woolworths sells fuel business to BP for almost $1.8b

While keeping the offer at the 527 Woolworths fuel and convenience sites, BP will also expand the offer to additional BP sites, increasing the redemption fuel coverage.

Under the deal, all of Woolworths' 527 petrol/convenience store sites will be sold to BP, along with an additional 16 sites now earmarked for development.

This deal will, however, require ACCC approval before it completes.

"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. Under the new agreement, all fuel will eventually be provided by BP. Caltex share fell 2.6 percent in early trade, with Caltex Australia's chief executive Julian Segal saying in a statement that he was "disappointed" the company's supply arrangement with Woolworths would end.

Perhaps the lesser of the four major fuel players in the Australia retail fuel market, BP could be about to leap its way to the top.

Woolworth's fuel arm reported earnings before interest and tax and before significant items at $117.8 million in FY16. "Importantly this partnership will enable us to jointly roll-out a new, world-class fuel and convenience food offering that replicates BP's successful partnership with Marks & Spencer in the United Kingdom".

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BP will also become a cornerstone partner of Woolworths Rewards loyalty programme, which features Qantas Frequent Flyer points.

Apart from this, an improved convenience store offering is said to be developed though the partnership by the combination of Woolworth's expertise in grocery and BP's global know-how in developing convenience offerings.

The deal comes just days after BP struck a $1bn (£814m) deal to drill for gas in Mauritania and Senegal.

The deal between BP and Woolworths will enable the Woolworths 4¢ a litre discount to be extended to BP outlets, the retailer said, which will lift to 80 per cent from 75 per cent the number of its outlets with service station nearby.

The move follows the success of BP's Simply Food forecourt chain in the United Kingdom, which it runs with Marks & Spencer.

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