![Woolworths will sell its petrol station portfolio to BP in a $1.8 billion deal that will help the retail giant fund its ongoing fight to regain market share in the grocery sector. Photo: Glen Hunt Woolworths will sell its petrol station portfolio to BP in a $1.8 billion deal that will help the retail giant fund its ongoing fight to regain market share in the grocery sector. Photo: Glen Hunt](/images/transform/v1/crop/frm/silverstone-feed-data/ec4149a5-fe28-4286-ad4b-67cce2391f84.jpg/r0_0_729_410_w1200_h678_fmax.jpg)
Control of the country's multi-billion dollar petrol market is set to be turned upside down with UK oil major BP plunging $1.8 billion to buy the Woolworths nationwide chain of petrol stations which will catapult it to the position of market leader, and triggering immediate concerns over the level of competition within the industry.
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Embattled retailer Woolworths has been in talks to sell its petrol stations for several months, with Caltex the underbidder. Caltex already supplies the Woolworths network of petrol stations, and it will see its share of the market shrink with the sale.
At present, Woolworths and Coles each hold an estimated 24 per cent of the national market, with Caltex holding 18 per cent in its own name, ahead of BP's 15 per cent. The purchase of the Woolworths outlets will give BP a dominant 39 per cent share of the national market, sparking concerns that its share of the market could dampen competition.
As a result, the competition watchdog the ACCC, said it is to review the deal, with motorist organisations pushing to ensure any deal does not lessen industry wide competition.
BP's purchase comes in the wake of the exit of Shell Oil from petrol retailing. It sold its Victorian refinery and 870 branded petrol stations to international oil trader Vitol in 2014, while another global trader, Trafigura, with an African partner of the Gull, CCG, Matilda and Neumann Petroleum outlets in recent years, giving it a spread of 270 outlets under the Puma Energy brand.
"The ACCC has been formally advised of the proposed transaction," the competition watchdog said in a statement. "We will commence a public review once we receive a submission from the parties."
NSW motorists organisation the NRMA said it is anxious for the ACCC to look closely at the deal.
"We obviously want the ACCC to look at this deal from a competition perspective," NRMA spokesman Peter Khoury said, pointing out that depending on where you live, competition between petrol retailers can be limited.
"Our own survey found that four of the ten cheapest service stations in Sydney were operated by BP franchisees, and we'd be keen to ensure that doesn't change if this deal goes ahead."
The public review by the ACCC is expected to get underway from around February, with Woolworths and BP saying they do not expect the deal to be approved and completed until early 2018.
Caltex said it was disappointed to have missed out on the chance to acquire the Woolworths petrol stations, while pointing out the share of the market held by Woolworths and Coles has been dwindling in recent years. Both Coles and Woolworths have built strong positions in the market thanks to a 4c a litre discount offered to shoppers at their supermarkets.While the negotiations for the Woolworths deal were underway, Caltex launched two acquisitions - one in Victoria and another in New Zealand - as it prepared for a potential loss of sales volume through the Woolworths petrol stations.
Woolworths needs the cash from the sale to reduce debt as it continues to streamline its operations in a bid to revive its faltering earnings. It has exited its Masters hardware venture which is being wound up as it shrinks back to its core supermarket and Big W retail offering.
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.
A core part of the deal involves the operation of convenience stores at the service stations, with BP to trial the Woolworths Metro format at its service stations prior to committing to rolling them out across 200 of its petrol stations, only a small part of its 1400 outlets across the country.
The sale to BP involves all 527 Woolworths outlets and is expected to take up to 12 months to finalise, Woolworths said.
The Woolworths fuel business has annual revenue of $4.6 billion and earned a pretax profit of $117 million last financial year.
Caltex said it supplies 3.5 billion litres of fuel oil to the Woolworths petrol stations and until the deal with BP is finalised, it will continue to supply the outlets.
Caltex said it was disappointed to have missed out on the Woolworths acquisition, although it stressed it had exercised "financial discipline" in the offer it lodged, while pointing out that volumes sold through supermarket discount schemes is declining. Coles has a similar discount scheme which it operates via Shell petrol stations.
The sale to BP is expected to take 12 months to complete, with the approval ov the Foreign Investment Review Board needed along with that of the ACCC before it can proceed. Until then, Caltex said it will continue to supply fuel to the Woolworths outlets.
As well, Caltex said it will pursue business opportunities adjacent to its existing fuel sales via its push into convenience retailing, along with product sourcing via its recently established trading arm in Singapore.
Woolworths shares surged 2.5 per cent to $24.44 on the sale with Caltex slipping 1.5 per cent to $30.15 as recent gains were eroded.
This story first appeared on The Sydney Morning Herald.