Woolworths’ petrol business will get an annual pre-tax earnings boost of $80 million after the retail giant locked in a 15-year wholesale fuel supply agreement with Caltex and increased the number of service stations where customers can hand in shopper dockets and receive petrol discounts.
The deal, first revealed by Street Talk, allows for a one off $50 million payment to Woolworths from Caltex.
Woolworths had been searching for ways to boost its petrol business after Caltex rival BP abandoned a $1.8 billion takeover bid that had hit a wall with the competition regulator.
In a statement on Thursday Woolworths said it would continue to pursue an initial public offering of the petrol unit and announced a new management team to “position it for growth”.
The company’s director of corporate development James Goth was named chief executive officer, and Angus Armstrong, currently general manager, fuel and metro, was named chief operating officer.
Street Talk said the unit could be worth about $2 billion and investment banks were positioning to be appointed roles to sell the float.
Chief executive Brad Banducci said: “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.
“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.”
The number of Caltex servos offering 4¢ per litre discounts on petrol to Woolies shoppers has been expanded by 125, from the current 104 sites.
Woolies will also supply food products to over 700 Caltex convenience sites.
Sourced from AFR