Australian grocer Woolworths has announced the sale of its petrol stations to fuel giant BP, in a deal worth nearly $1.8 billion.
The company have been considering a sale for some time, since an earlier misguided move into the hardware sector led to a $1.8 billion impairment charge. Woolworths then reported a $1.2 billion loss for the full year in August, amidst a slump in petrol and fuel sales.
The sale to BP will include Woolworths’ 527 fuel convenience sites and 16 development sites, but is not expected to be completed until January 2018.
“The release of $1.785 billion from the sale will be used to strengthen our balance sheet and reinvest in our core businesses,” Woolworths chief executive Brad Banducci said in a statement to the stock exchange.
“Following extensive evaluation of the proposals received, we decided that BP’s proposal met our strategic and broader commercial imperatives and in its entirety provided superior long-term shareholder value.”
There were several other bidders interested in the company’s fuel business, including Australian fuel provider Caltex. Under the new agreement, all fuel will eventually be provided by BP. Caltex share fell 2.6 percent in early trade, with Caltex Australia’s chief executive Julian Segal saying in a statement that he was “disappointed” the company’s supply arrangement with Woolworths would end.
Juliana Roadley, a market analyst at stockbroker Commonwealth Securities told Reuters: “Hardware wasn’t so great … this is another area of their business that they weren’t really managing well.”
Woolworths (ASX:WOW) shares are currently up 1.93 percent at 24.31 per share (1128GMT)