Woolies sells petrol sta­tions for $1.7bn

The Weekend Australian - - BUSINESS - SA­MAN­THA BAI­LEY CHRIS JENK­INS

Wool­worths has out­lined plans to sell its petrol re­tail­ing busi­ness to Bri­tain’s EG Group for $1.73 bil­lion, in a move that in­tro­duces a new player in the fuel dis­tri­bu­tion mar­ket.

The sale to EG, which was first fore­shad­owed by The Aus­tralian’s DataRoom col­umn last month, is ac­com­pa­nied by a 15-year deal that cov­ers fuel dis­counts and loy­alty schemes and whole­sale prod­uct sup­ply from Wool­worths’ FoodCo, Wool­worths said late yes­ter­day.

The move will al­low Wool­worths chief ex­ec­u­tive Brad Ban­ducci to pull the trig­ger on a cap­i­tal re­turn, al­though the re­tailer is yet to fi­nalise the de­tails. At the same time it will de­liver funds to in­vest in up­grad­ing its super­mar­kets busi­ness.

Wool­worths said 540-branded ser­vice sta­tions would be in­cluded in the agree­ment.

EG ranks as one of the big­gest play­ers in petrol and con­ve­nience re­tail, with 4700 sites in Eu­rope and across North Amer­ica.

The deal comes af­ter Aus­tralia’s largest su­per­mar­ket op­er­a­tor shelved a $1.8bn sale of its petrol sta­tions to BP af­ter it was blocked by the Aus­tralian Com­pe­ti­tion & Con­sumer Com­mis­sion last De­cem­ber over con­cerns that fuel prices might rise. BP of­fi­cially aban­doned the deal in June.

The Wool­worths petrol net­work, which dis­trib­utes Cal­tex branded fuel, is the na­tion’s sec­ond big­gest fran­chise with about 24 per cent share of the mar­ket, ac­cord­ing to ACCC fig­ures. This is be­hind the Coles Shell net­work, which has a 26 per cent share, and com­pares to BP on 15 per cent.

Mean­while, ris­ing petrol prices helped cool sub­se­quent talk of a share­mar­ket float for the busi­ness, which had been touted as a pos­si­ble “Plan B”. Fuel mar­gins have also been squeezed on the back of a fall­ing Aus­tralian dol­lar.

Ser­vice sta­tion op­er­a­tor Viva En­ergy, which re­cently listed, closed at $2.22 per share yes­ter­day, down from its mid-year list­ing price of $2.50.

“The Wool­worths as­sets present a fan­tas­tic op­por­tu­nity to fur­ther grow our in­ter­na­tional foot­print,” EG founder and co- CEO Mohsin Issa said. EG was “com­mit­ted to in­vest­ing in the site net­work,” he added.

The trans­ac­tion is sub­ject to For­eign In­vest­ment Re­view Board ap­proval. Com­ple­tion is ex­pected to oc­cur in early 2019.

“Wool­worths Group will con­sider a range of op­tions for the use of pro­ceeds, in­clud­ing cap­i­tal man­age­ment ini­tia­tives,” the com­pany said in its state­ment.

In the past fi­nan­cial year earn­ings from Wool­worths’ petrol busi­ness in­creased 7.1 per cent to $168 mil­lion.

EG Group is owned by pri­vate eq­uity player TDR Cap­i­tal and op­er­ates fuel re­tail brands Esso, BP, Shell and Tex­aco across its op­er­a­tions. In­vest­ment bank Citi is work­ing for EG Group,

Mean­while, Wool­worths is eye­ing other pos­si­ble as­set sales. This in­cludes the Bruce Mathieson-backed ALH Group joint ven­ture and dis­count depart­ment store Big W.

The loss-mak­ing Big W recorded a 2.2 per cent gain in same store sales for the quar­ter, and the su­per­mar­ket gi­ant has been mov­ing to in­vest in the busi­ness in the hope of land­ing a buyer.

Wool­worths last month posted to­tal sales for its Aus­tralian super­mar­kets of $9.87 bil­lion — up 1.9 per cent — while at its drinks busi­ness, led by Dan Mur­phy’s, com­par­a­tive store sales rose 1.7 per cent. Its New Zea­land super­mar­kets booked a 4 per cent lift in sales.

The sale comes as ri­val Wes­farm­ers pre­pares the $20bn de­merger of Coles next month. Coles’s growth should help sell the de­merger to in­vestors, as new boss Steven Cain talks up the per­for­mance of the su­per­mar­ket busi­ness. Mr Cain has sig­nalled he is will­ing to con­sider an exit from his fuel busi­ness.

Source: Bloomberg

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