Coles Group looks set to sell its fuel and convenience retailing business to Viva Energy for $300 million and leases, saying the leases represented an $816 million liability on its FY22 balance sheet.
Currently the two companies own and operate 710 Coles Express branded sites in an alliance that was due to end in 2029. The sale will transfer Coles’ share to Viva, and is expected to be completed by 2HFY23, subject to Australian Competition and Consumer Commission and Foreign Investment Review Board approval.
Coles CEO Steve Cain said the move would allow it to focus on its grocery and liquor businesses and sustainability targets. He said Viva was well-placed to take the Express business forward.
Viva Energy CEO Scott Wyatt said the acquisition would enable the company to accelerate its growth plans for the integrated fuel and convenience business, which would operate as an independent business unit in the company.
The company said, “Demand for traditional fuels is also expected to remain strong well into the next decade, and the adoption of new energies such as battery and hydrogen electric vehicles will lead to growing demand for convenient on-road charging and refuelling options, and therefore new convenience growth opportunities.”
The deal will see land occupied by Coles Express at the sites where it is a subtenant of Viva – 664 sites –revert to Viva Energy, and Viva will acquire the remaining 46.
The 6000 Coles Express employees will be offered roles with the Viva Energy Retail business "on terms and conditions no less favourable (on an overall basis).
Coles has agreed to provide ongoing support and services to Viva Energy for up to two years as it builds its internal capabilities.
Site branding will change over the next 3.5 years, with the majority updated within the next two. Existing loyalty programs including FlyBuys and discount dockets will continue.=
In FY22, the Coles Express business reported sales of $1,132 million, with earnings before interest and tax of $42 million. Coles Express accounted for $816 million of the lease liabilities on Coles’ FY22 balance sheet.
The company expects to record a “small gain” on the sale while the earnings impact is not expected to be material.
