Deadline looms for Woolworths’ $1.8bn fuel deal
Woolworths will be open to consider other options for the sale of its fuel business in the coming months as the deadline for a sunset clause in its deal with BP to sell its service station network for $1.8 billion approaches.
Unveiling third quarter sales figures on Wednesday, Woolworths Group chief Brad Banducci revealed that the agreement, which the ACCC knocked back last year, has a sunset clause that expires “towards the middle of the year”, suggesting that a decision will come before the end of FY18.
Woolworths could extend its agreement with BP if both parties agree, or look to pursue other offers that might be more amenable to the competition watchdog.
“We’re still working through the myriad of options we have,” Banducci said. “There’s been expressions of interest from a range of parties. As we look at all of our options developing a package that is acceptable to the ACCC is at the very top of the list in terms of our priorities.”
The ACCC shot back a proposal for BP to purchase Woolworths’ fuel assets last year, finding that the deal 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 said Woolworths and other majors have actually been losing market share to independent players in recent months.
“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 on Wednesday.
A 6.9 per cent decline in comparable petrol volumes weighed on Woolworths’ fuel business in the third quarter, sending sales down 0.3 per cent to $1.2 billion. Comparable sales, adjusted for Easter, declined 0.8 per cent. Analysts are concerned that the value of the fuel business may erode the longer a deal remains in limbo, although Banducci said the business was performing well in the context of its situation.
“Within the majors we’ve been holding our share quite consistently,” he said.
The fuel sale has around 533 petrol canopies tied up in it, considerable capital that Woolworths could employ in other parts of its business should a sale go ahead.