Woolworths to splash cash after FIRB green lights $1.7bn petrol station deal

JOHN DURIE
FEBRUARY 28, 2019
The Australian
Woolworths is set to return another $1.7 billion to shareholders in April after the Foreign Investment Review Board (FIRB) today approved its sale of 540 petrol stations to the UK based EG group.
When releasing its half-year earnings earlier this month, the company (WOW) said the money raised from the fuel sale would be returned to shareholders when the deal closed.
The retailer paid shareholders 45 cents a share after its half year results which was up 4.7 per cent from year ago levels.
The sale to EG, which was first foreshadowed by The Australian’s DataRoom column in October was announced in November followed a lengthy sales process.
Under the deal Caltex will continue to supply fuel to the EG owned stations.
EG ranks as one of the biggest players in petrol and convenience retail, with 4700 sites in Europe and across North America.
The deal comes after Australia’s largest supermarket operator shelved a $1.8bn sale of its petrol stations to BP after it was blocked by the Australian Competition & Consumer Commission in December 2017 over concerns that fuel prices might rise. BP officially abandoned the deal in June.
The Woolworths petrol network, which distributes Caltex branded fuel, is the nation’s second biggest franchise with about 24 per cent share of the market, according to ACCC figures. This is behind the Coles/Shell network, which has a 26 per cent share, and compares to BP on 15 per cent.
Meanwhile, rising petrol prices helped cool subsequent talk of a sharemarket float for the business, which had been touted as a possible “Plan B”. Fuel margins have also been squeezed on the back of a falling Australian dollar.
“The Woolworths assets present a fantastic opportunity to further grow our international footprint,” EG founder and co-CEO Mohsin Issa said at the time the deal was announced. EG was “committed to investing in the site network,” he added.
In the past financial year earnings from Woolworths’ petrol business increased 7.1 per cent to $168 million.
EG Group is owned by private equity player TDR Capital and operates fuel retail brands Esso, BP, Shell and Texaco across its operations. Investment bank Citi is working for EG Group.
Earlier this month, the supermarket giant posted a 1 per cent lift in half-year profit to $979m as group sales rose 2.2 per cent to $30.704bn.
But Woolworths’ share price dived in early trade as analysts said its net profit from continuing operations of $920m was below the market consensus estimate