BP buys 527 Woolworths servos in $1.8bn monster deal

Woolworths has 430 petrol station sites around Australia. Pictue: Dean Martin.

Australia’s petrol industry will undergo one of the biggest shakeups in its history after Woolworths announced it is selling its 527 petrol station sites to BP for almost $1.8 billion.

The supermarket giant, which has endured a torrid year after admitting defeat in the hardware store war and selling its struggling Masters chain, finalised a landmark deal to sell the sites – as well as 16 other sites already committed to be developed as new stations – for $1.785 billion.

The new deal brings to an end Woolworths’ association with fuel provider Caltex, which currently partners with and supplies fuel to all Woolworths branded petrol stations.

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BP outbid Caltex for the right to service the fleet of petrol sites, in a shock result that came after it was revealed in October that Caltex was in the final stages of negotiations for a deal to continue as Woolworths’ fuel supplier.

The BP deal is subject to BP gaining Australian Competition and Consumer Commission approval, as well as a tick from the Foreign Investment Review Board, and won’t be finalised until at least January, 2018.

Woolworths’ 4c fuel redemption offer, which remains critical to its petrol sales strategy, will remain in place for at least the next 10 years, the company announced in a statement.

The Woolworths Caltex service station in western Sydney.

Woolworths’ union with Caltex will officially end in early 2018.

“The release of $1.785 billion from the sale will be used to strengthen our balance sheet and reinvest in our core businesses – which will further benefit customers and shareholders,” CEO Brad Banducci says.

“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.”

Caltex boss Julian Segal says his company was not prepared to match BP’s offer, in the interests of “financial discipline”.

“Caltex put forward a proposal which it believes represented full and fair value, taking into account the declining trend in supermarket fuel redemption volumes, the restrictive commercial terms to enable the ongoing provision of a fuel discount by Woolworths, and considering the fact that the Woolworths network is leased rather than owned,” Caltex says in a statement.

The deal continues a ‘line in the sand’ year for Woolworths, which sold its Masters chain and is undergoing a restructure of its loss-making Big W business. Adding to its Big W challenges, CEO Sally Macdonald resigned in November, just 11 months after taking on the job.

As part of BP’s union with Woolworths, the pair will launch a pilot food program called “Metro at BP”, which aims to mimic BP’s “Simply Food” offering that it successfully launched in the UK after joining forces with food and retail giant Marks & Spencer.