BP is putting the finishing touches on its Australian Competition & Consumer Commission submission to buy Woolworths service stations and will lodge it with the competition regulator in the next week.

The British mega group needs competition approval to kickstart the transaction and is expected to argue that the entrance of some major overseas players has minimised the competition impacts.

BP will pay nearly $1.8 billion for 527 convenience and fuel sites and 16 development sites in a deal that is not expected to be finalised until early next year.

The first regulatory hurdle will be the ACCC and Rod Sims’ ruling will dictate the future direction of the transaction. The deal also hinges on Foreign Investment Review Board approval, and while advisers don’t believe there should be any trouble, the final seal of approval will not come until later this year.

Competition lawyers and analysts have forecast that BP will be forced by the ACCC to sell up to 90 sites across the country as the combined group will control 39 per cent of the petrol market.

In its submission, BP is likely to say that competition is alive and well in the domestic market thanks to oil traders Trafigura and its subsidiary Puma, along with Vitol’s entrance.

Puma paid $625 million for Ausfuel in 2013, adding Gull, Choice and Peak service stations to its domestic portfolio, which centres on northern Australia.

The three trading groups, which are the biggest in the world, have moved to Australia because the refining industry is on its last legs and they can profit from importing fuel from Singapore.

The ACCC is expected to break down the competitive impacts from BP picking up the Woolworths sites on an area-by-area basis. It’s been argued that commuters in urban areas drive shorter distances to buy fuel than people in the bush.

BP’s deal with Woolworth has cast doubt over Caltex’s future in Australia. Caltex, advised by UBS, lost out on the transaction. It has reportedly ditched the Swiss bank and plans a string of acquisitions to make up for losing the 3.5 billion-litre supply deal.

Some advisers say Caltex paid over the odds when it shelled out $324m for Gull New Zealand, while it outlaid $95m for Milemaker’s retail fuel operations in Victoria.

Now it’s out hunting for independent fuel retailers — especially Freedom Fuels — and disgruntled franchisees of a major brand.

But advisers say there’s a risk that Caltex is being too bullish in looking for assets to cover the Woolworths supply loss and is in danger of paying too much.

Credit Suisse analysts stripped a sizeable $100m out of Caltex’s earnings forecast for 2018 to reflect the loss.

Extracted from The Australian.