Woolworths $1.8 billion fuel deal torn up
The businesses had been considering their options for months after the ACCC knocked back their proposal last December, but on Thusday Woolies said BP had notified it that plans to purchase the business would be abandoned.
Woolworths will now be free to pursue other options for the sale of its petrol business that may be more amenable to the ACCC.
Group chief Brad Banducci said last month that Woolies had a “myriad of options” and that a “range of parties” had expressed interest in the business.
But analysts have expressed concern that the value of Woolworths’ fuel business may have eroded further since its 2016 agreement with BP, tempering potential returns.
It will also further delay the proceeds Woolworths had planned to use from the sale of its fuel business to pay down debt and pursue supermarket refurbishments.
Both BP and Woolworths had been trying to change their 2016 deal to get a tick of approval from the ACCC, but as a sunset clause in the deal approached it appears it was realised that this was not feasible.
BP said on Thursday that it had determined that the transaction “could not be structured to meet its strategic objectives”.
The ACCC has maintained that the sale of Woolworths’ fuel assets to BP would “substantially lessen” competition in the market.
“Woolworths is a vigorous and effective competitor which has an important influence on fuel prices and price cycles in many markets throughout the country,” said ACCC chairman Rod Sims said last December.
But Banducci offered a different opinion last month, saying that Woolies had been losing market share to independent players.
“All majors in Australia are actually losing some market share to the smaller independents, often the value players, a fact that seems to have escaped our esteemed colleagues in the ACCC,” he told analysts in May.
The 527 petrol canopies that were tied up in the deal will likely weigh on Woolworths’ fourth quarter performance.
Comparable petrol volumes declined by 6.9 per cent in the third quarter, which sent sales down by 0.3 per cent to $1.2 billion. Comparable sales, adjusted for Easter, declined by 0.8 per cent.
BP said the decision would not deter it from its ambition to transform the retail convenience sector in Australia.
“I am very confident in what the future holds and the deliver of BP’s strategy for strong market-led growth to 2021,” Andy Holmes, BP’s chief operating officer for Asia Pacific, said on Thursday.
UPDATED: 10:41 AEST
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