Caltex confirms offer to acquire Woolworths Petrol business

Posted by AFN Staff Writers on 19th October 2016

Caltex Australia has confirmed it has made a conditional and confidential offer to acquire Woolworths’ fuel businesses and to continue the alliance between the two companies.

Woolworths has spent the past few months deciding whether or not to sell its nearly 600 Australian petrol businesses, receiving incomplete and conditional proposals from a number of different unnamed parties.

Caltex is currently the exclusive supplier of petrol and diesel to Woolworths with annual sales volumes of approximately 3.5 billion litres per annum.

The petrol giant said any possible transaction with Woolworths remains uncertain and is expected to take time to complete, but that it will update the Australian Securities Exchange (ASX) if there are any changes with its wholesale supply arrangements with Woolworths.

“Caltex will maintain financial discipline in this process and remains focussed on the creation of top quartile total shareholder returns, driven by profitable, capital efficient growth,” Caltex said.

If the deal eventuates, Caltex would own almost 40 per cent of the retail fuel market in Australia. It currently has an approximated 16 per cent stake.

Could selling its petrol businesses help revive Woolworths?   

Woolworths has been considering selling its petrol businesses after the release of its 2016 financial results which saw the company report AUD $1.2 billion in losses.

While it is already in the process of trying to sell its failed and costly hardware venture, Masters, its petrol businesses did not perform well in its 2016 financial year with sales down 18.1 per cent on Woolworth’s prior financial year.

At the time the 2016 profits were released, Woolworths attributed the drop to declining average fuel sell prices and a change in its alliance with Caltex. This change saw sales from 131 Caltex operated sites no longer be recognised in Woolworths profit reports.

Despite the struggles with fuel sales, petrol station merchandise sales increased by 6.4 per cent in Woolworths 2016 financial year and sales still totalled AUD $4.6 billion, nothing to sneeze at for either Woolworths or a prospective buyer.

Whether Woolworths continues to own its petrol businesses or sells it onto another business, the owner will need to keep an eye out for Coles which launched its new convenience format in August 2016, ‘Big Yum at Little Coles’. The new format, which is already at three service stations in Melbourne, is catering to the modern consumer with $1 coffees, frozen drinks similar to 7-Eleven’s Slurpee, and ready-made meals.