Woolworths’ shares dipped in today’s trading session after the retailer confirmed the receipt of regulatory approval to the sale of Woolworths-owned fuel convenience sites to EG Group. This translates a confirmation of the Foreign Investment Review Board (FIRB) that the Commonwealth has no objection to EG acquiring Woolworths Group’s 540 fuel convenience sites.
The decision of Woolworths Group Limited (ASX: WOW) to sell petrol business and get into a commercial alliance with EG Group was first announced in November 2018. As per that announcement, Woolworths has executed a binding agreement to sell its 540 fuel convenience sites to British retailer, EG Group, for a consideration of A$1.725 billion.
However, the deal was focused on continuing delivering the Woolworths’ popular fuel discount as well as the opportunity for the consumers to earn the reward points on fuel and merchandise purchases across the network.
Brad Banducci, Woolworths Group CEO stated, “The transaction will continue to provide the greater value to Woolworths’ customer when shopping with it with the added benefits of reward points and the fuel discount offer of 4 cents per litre set to continue.”
After today’s announcement, the deal has come to its final close with pre-condition of securing FIRB approval now satisfied. However, the completion of the transaction is expected to take place in early April 2019. Following the completion of the transaction, Woolworths Group intends to evaluate the number of alternatives to utilise the proceeds, including capital management initiatives.
Beside fuel convenience sites, the entire management and operations team of Woolworths Petrol business would be reportedly transferred to EG Group. The purchaser, EG Group, is a Blackburn based global leader in fuel and convenience retailing with operations across Europe and North America at around 4,700 sites, employing over 28,000 people.
Australia’s one of the top consumer staples brands, Woolworths, has also inked a new wholesale food supply deal with EG Group that is expected to provide a comprehensive product range and competitive pricing.
Mr Banducci stated that “A long-term wholesale food supply agreement outlines the benefits that EG Group could determine from competitive product sourcing to provide a world-class convenience offer that will further bolster the scale to Woolworths FoodCo.”
The Group has recently declared a 2.3% rise in 1HFY19 sales to $30.58 billion, taking the Group’s half-year profit from continuing operations to $920 million, up 2.1% on 1HFY18. Overall Net Profit after tax of the company increased by 1.0% to $979 million for the six months ended 31 December 2018.
On the back of robust financial position, the Board declared an interim dividend of 45 cents per share for 1HFY19, an increase of 4.7% on the prior year. The payment date of the dividend has been fixed to 5 April 2019 with the record date of 1 March 2019.
More importantly, today, Woolworths again confirmed its intention to return up to $1.7 billion of capital to its shareholders following the completion of Petrol division sale.
Today’s dip in WOW stock price further reflects the trading on Ex-Dividend that dragged the stock down by 1.07% to last trade at $28.670 on 28 February 2019.
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