Woolworths sells petrol business

Date : 05 January 2017

Australia's market leading grocer has sold its petrol operation to BP for AU$1.8bn (US$1.3bn).

New deal will retain fuel vouchers and test new c-store partnership

After months of speculation, Woolworths has confirmed that BP will acquire the 527 petrol stations and 16 sites under development from the retailer. The petrol sites that are currently supplied by Caltex Australia will gradually be switched to BP operated sites. The deal is subject to approval and is not anticipated to be completed until January 2018. One of the key requirements of Woolworths' sale, was that the retailer wanted to try and retain the strategic advantage that a fuel network brings to its food business. Therefore, under the deal the BP sites will continue a fuel voucher scheme linked to Woolworths supermarkets, plus the businesses will jointly trial a convenience format at 200 sites. BP already has similar operations with other retailers around the world, including its longstanding relationship with M&S in the UK, where the businesses co-operate fuel sites.

Helping to refocus attention on the core food business

This disposal is Woolworth's latest, following the sale of its Masters Home Improvement business in 2016. Following a challenging period, the retailer is looking to exit non-core operations in order to recalibrate its business and refocus more attention back onto its core supermarket business. The retailer's fuel business had been experiencing declining sales in recent periods following strong competitor activity, plus deflationary pressures. The sale will provide a healthy cash injection to the business, with the Woolworths CEO, Brad Banducci, commenting that the funds would be used to strengthen the balance sheet, plus be reinvesting into the core business.