Australian supermarket giant Woolworths Ltd (WOW.AX) is selling its chain of petrol stations to BP plc (BP.L) for A$1.8 billion ($1.29 billion) in cash, Woolworths said in a statement on Wednesday.
The move will see the oil major tighten its grip on the Australian market by adding 527 petrol stations and 16 sites under construction to the 350 outlets it already owns in the country.
Woolworths had been mulling over a potential sale of its fuel business for some time as the company has been under pressure to preserve capital after its failed home improvement venture Masters saw it post a loss of $1.2 billion in its full year results in August, while petrol and food sales also slumped.
BP, based in London, has been trying to rebuild its operations after having to sell assets to pay for the costs of the 2010 Gulf of Mexico disaster.
It also involves an agreement to continue a fuel voucher scheme and the parties will jointly trial a convenience business at 200 of the petrol stations.
The deal between BP and Woolworths will enable the Woolworths 4¢ a litre discount to be extended to BP outlets, the retailer said, which will lift to 80 per cent from 75 per cent the number of its outlets with service station nearby.
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BP, which has 1,400 branded fuel and retail stores across Australia, expects to complete the deal by the end of 2017, subject to regulatory approval. Caltex-being Woolworths' supplier-happened to be the under bidder for the deal.
Woolworths Rewards Members will be able to earn points on both fuel and in-store purchases as well as redeem points on purchases across BP sites.
BP's proposal met Woolworths' "strategic and broader commercial imperatives", Banducci said.
The Australian supermarket company is set to consolidate its balance sheet through the sale proceeds which it intends to reinvest in its core business.
The deal is expected to be completed no earlier than January 2, 2018. "Around the world we have delivered leading offers like this via long-term partnerships with other leading food and grocery retailers including Marks & Spencer in the United Kingdom and REWE in Germany".