On 28 December 2016, Woolworths announced that it had entered into a binding deal with BP for the sale of its national service station network for a reported $1.8b.
The announcement sparked a rash of media stories and comment by industry commentators – some of which appeared to be inconsistent with the simple statement of facts that had been made by both parties – sparking some inquiry from ACAPMA members and the general media.
In an attempt to clarify some of the apparent confusion, it is worth noting the following:
- Woolworths has entered into a binding contract with BP for the sale of its national network of 527 service station sites
- Both parties have noted that, given the size of the deal, the final transaction will be subject to approval from both the Australian Competition and Consumer Commission (ACCC) and the Foreign Investment Review Board (FIRB)
- Given the requirements for statutory approvals, both parties do not expect the deal to be finalised until early 2018
- Once finalised, the deal will preserve the Woolworth’s 4c/litre discount (and likely see an extension of its reach) as well as making provision for the Woolworths Rewards programme
- The deal makes provision for the pilot of the Woolworths’ Metro concept at 16 BP sites, with a possible future expansion of up to 200 sites
One area of apparent confusion surrounding the deal relates to media reports that the deal would likely give BP a “dominant market share of 39%” (as reported at smh.com.au on 28 December 2016).
“This particular comment resulted in ACAPMA fielding a number of calls from members with respect to the potential impact of the proposed deal on market competition”, said ACAPMA CEO Mark McKenzie.
“It is worth mentioning that this statement is not actually correct as it appears to be premised in a count of the number of BP branded sites – the majority of which are operated by independent dealer businesses which operate under commercial supply and/or licencing arrangements, with BP having no control over forecourt pricing”, said Mark.
ACAPMA’s preliminary analysis of the prospective deal suggests that once these independent dealer operations are excluded, the BP-Woolworths deal will result in up to 800 sites being owned and operated by BP (including a handful of CA sites).
“This represents approximately 13% of the nation’s service station network – not the 39% reported in some recent press articles”, said Mark.
That said, ACAPMA welcomes the ACCC’s public statements that they “will commence a public review once submissions are received from both BP and Woolworths” (as reported at smh.com.au on 28 December 2016)
“While there is no doubt that changes of this nature are a big deal in our industry, we have seen them before. The most important thing is that all stakeholders take the time to work through any competition issues in a considered manner using all available facts about the nature and operation of our market”, said Mark.
“The ACCC has a statutory role in monitoring competition in our industry and we are confident that they have the knowledge and organisational capacity to ensure that the national fuel market remains openly competitive in the future”, said Mark.
When the time comes for the public review, ACAPMA will make a submission in the usual way, and the 12-month finalisation period means that significant time has been allowed for the comprehensive examination of this deal from a competition perspective.