Woolworths has entered into a 15-year fuel supply agreement with Caltex.
The deal, a long-term alliance covering convenience stores, wholesale food supply and loyalty rewards and adds 125 Caltex sites to Woolworths’ existing 638 site redemption network.
However, Woolworths says it still plans to pursue an IPO or sale of its petrol business. It has installed an expanded management team to grow the business on a standalone basis.
The new deal with Caltex comes a few weeks after BP abandoned its proposed $1.8 billion purchase of Woolworths’ retail fuel and convenience network. That decision followed the Australian Competition and Consumer Commission knocking back the sale saying it would reduce competition and lead to higher prices, even after BP offered to sell some stations to ease competition concerns.
Caltex will make a one-off payment of approximately $50 million to the Woolworths Group.
Woolworths says the deal is expected to deliver a pre-tax earnings boost of $80 million a year.
“While we were disappointed with the termination of the BP agreement, we believe the customer benefits of our alliance with Caltex, combined with a new fuel supply agreement will allow us to deliver a compelling outcome for both our customers and our shareholders. Customers will have access to an extended redemption and loyalty network and an exciting new convenience food format,” Woolworths CEO Brad Banducci said.
“The Woolworths Petrol business is in a good position to pursue its own growth agenda supported by a highly competitive fuel supply agreement and a strengthened management team, all underpinned by solid links to the Woolworths food business.”