BP is understood to be eyeing Woolworths’ service station network after a report by Fairfax Media this week revealed the oil giant had recently sent executives to Australia.
While no confirmation has been reported to date, the prospect of Woolworths divesting itself of its service station arm would free up capital for the company and allow it to concentrate that capital into its underperforming supermarkets division and Big W stores.
According to analysts, the Woolworths petrol business could be worth around $1.5 billion. If a sale was to be on offer there would likely be more than one bidder. Woolworths’ service stations’ long term partner and fuel supplier, Caltex, may also be interested in any potential sale.
The difficulty for Caltex may be the Australian Competition and Consumer Commission’s (ACCC) interest in market dominance. In 2010 the ACCC blocked a bid by Caltex for the former Mobil service station network on the grounds of market domination. That blocking by the competition watchdog resulted in 7-Eleven buying most of the Mobil sites.
Based on figures from the ACCC report, Monitoring of the Australian Petroleum Industry, Caltex’s market share sits at 18 per cent and Woolworths’ at 24 per cent. If Caltex was to acquire the Woolworths sites, a dominant market share of 42 per cent would result.
BP is understood to hold around 13 per cent market share. Adding in Woolworths’ 24 per cent market share that would take the company to a likely 37 per cent. This would compare with the ACCC statistics for Coles Express, 24 per cent; Caltex, 18 per cent and 7-Eleven, around 6 per cent.
If a sale is confirmed, the two players Caltex and BP entering into a likely bidding war would draw the appropriate attention of the ACCC. If Woolworths site are truly on the market, divestment to a number of independent players may also be an option.
Colin Long is C&I Retailing Magazine’s petroleum editor. He can be contacted at firstname.lastname@example.org.