After a two-year process, grocery giant Woolworths Group has finally penned a $1.7 billion deal to offload its 540 fuel convenience sites to UK-based EG Group.
As reported earlier this week by The Australian Financial Review’s Street Talk column, EG Group was named the preferred bidder as it looked to get a foothold in the local market.
It has been a long road for Woolworths and its bankers Morgan Stanley and UBS, which were directed to re-engage with trade bidders following an unsuccessful attempt to sell the unit to BP in mid-June. That deal fell over after being knocked back by the Australian Competition and Consumer Commission. Woolworths also had considered a demerger and separate listing.
Following completion of the transaction in early 2019, Woolworths said it will consider a range of options for the use of proceeds, including capital management initiatives, according to a statement released late on Friday afternoon.
Under the deal, the pair have entered into a 15-year commercial alliance covering fuel discount redemption, loyalty and wholesale product supply.
Woolworths said its popular 4¢-per-litre fuel discount will continue across the network, and customers will continue to earn Woolworths Rewards points on fuel and merchandise purchases.
Woolworths will also act as a food wholesaler to the network, providing an extensive product range and competitive pricing. The Financial Review this week flagged Woolworths’ expanded ambitions in this area.
All existing Woolworths Petrol management and operations teams will transfer to EG Group following completion of the sale, the company said in a statement.
Woolworths Group chief executive Brad Banducci said the transaction is positive for customers and shareholders.
“The agreement will continue to strengthen the opportunities our customers have for greater value when shopping with us, with the benefits of the Woolworths Rewards program and the fuel discount offer set to continue,” he said.
“A long-term wholesale food supply arrangement will also ensure that EG Group can benefit from competitive product sourcing, including Woolworths’ own brands, to provide a world-class convenience offer that will add further scale to Woolworths FoodCo.”
EG Group founder and co-CEO Mohsin Issa said the Woolworths’ assets present a fantastic opportunity to further grow its international footprint.
“We are committed to investing in the site network, introducing leading retail brands, developing the alliance with Woolworths and working with the exceptional management team,” he said.
EG Group operates about 4700 fuel and convenience sites across Europe and North America and employs over 28,000 people. The transaction is subject to Foreign Investment Review Board approval.