BP plc (BP - Free Report) has agreed to shell out A$1.785 billion ($1.3 billion) for Woolworths Ltd.’s portfolio of Australian gas stations in a deal that will likely make the London-based oil company one of the nation’s biggest fuel providers. We expect these developments to result in stock price appreciation. Year to date, the stock has gained 18.5%, while Zacks categorized sub industry Oil & Gas- International Integrated Market has increased by 19%.
Per the deal, the British energy company will acquire 527 fuel outlets as well as 16 development sites. The Woolworths fuel outlets are supplied by rival Caltex Australia Ltd. Currently, BP owns 350 retail locations across Australia and supplies fuel to an additional 1,000 outlets owned by independent business partners.
BP and Woolworths’ partnership also includes the continuation and expansion of a scheme offering fuel discounts for supermarket customers.
Earlier, BP entered into deals with retailers including Marks & Spencer Plc in the U.K. and REWE in Germany. For Woolworths, the sale is part of Chief Executive Officer, Brad Banducci’s strategy to reverse the supermarket chain’s deteriorating fortune. After being declared the CEO in February 2016, Banducci has cut jobs, written off assets and slowed store openings, while sales at its Australian food division started increasing again.
BP’s proposal met Woolworths’ strategic and broader commercial requirements. The proceeds will be reinvested in Woolworths’ core business and the deal isn’t expected to have a material effect on earnings.
Caltex, which has been the exclusive supplier of petrol and diesel to the Woolworths outlets, had also expressed an interest in acquiring the business.
The purchase by BP marks a deviation from the trend of the recent years that has seen a smaller share of Australia’s retail fuel operators being owned by the major oil companies. There are about 6,400 outlets Down Under, while 52% of them were associated with one of the four major oil companies operating in Australia as of Jan 2016, only 9% were directly controlled by them.
Subject to regulatory approvals, the transaction is not expected to conclude before Jan 2, 2018.
BP currently has a Zacks Rank #3 (Hold). Better-ranked players in the same sector include Braskem S.A. (BAK - Free Report) , Suncor Energy, Inc. (SU - Free Report) and Noble Midstream Partners L.P. (NBLX - Free Report) . All these stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Braskem posted a positive earnings surprise of 107.79% in the last reported quarter.
Suncor Energy posted a positive earnings surprise of 300% in the preceding quarter. It reported an average earnings surprise of 40.55% for the four trailing quarters.
Noble Midstream Partners posted a negative earnings surprise of 77.78% in the last reported quarter.
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