Coles Group (ASX: COL) has today announced it will sell its 710 Coles Express sites to Viva Energy Group (ASX: VEA) for $300 million, with the retail giant placing greater focus on its supermarket and liquor businesses.
As part of the deal, Viva Energy will own and operate the convenience retail sites currently operated by Coles, and accordingly, the ‘Fuel and Convenience Alliance’ between the two parties - which was due to end in 2029 - will terminate at transaction completion.
Speaking at a press conference this morning, Coles CEO Steven Cain said the deal was a “win-win” for both parties.
“We knew that we had an asset that by 2029 the agreement would end, so it’s ended up being a win-win,” Cain said.
“This is a business that Viva want to own, integrate and invest in, which will be good for their customers but will also be good Coles customers over time.”
Though Viva intends on rebranding the entire network over the next two years, Coles will not be totally divorced from the sites as the supermarket’s customers will still get access to the four cent per litre fuel docket deal across the network.
Further, Viva Energy will remain a partner of the Flybuys Program, with customers able to continue earning and redeeming points across the network.
In addition, the approximately 6,000 staff working at the 710 Coles Express sites will transfer to Viva Energy following completion of the deal - expected to occur in the second half of FY23 subject to consumer watchdog and Foreign Investment Review Board (FIRB) approval.
“Viva is well-placed to make the most of opportunities to grow the Express business into the future, while we will strengthen our focus on our omnichannel supermarket and liquor businesses and our ambition of becoming Australia’s most sustainable supermarket group,” Cain said.
For Viva, the deal marks a major expansion of its retail convenience network which currently includes an investment in the regionally-focused Liberty Convenience business comprising 92 sites.
The company points to an average growth rate of 3.1 per cent over the last seven years for the Australian convenience market, while Coles Express sales have risen 3.7 per cent over the same period of time.
Viva says it expects the convenience segment to continue to deliver strong growth potential over the long term, driven by population growth, changes in mobility, and increased consumer demand for convenience led offers.
In addition, Viva is optimistic about ongoing demand for traditional fuels, and notes it is well-placed to satisfy growing demand for on-road recharging and refuelling options for battery and hydrogen electric vehicles.
“We have enjoyed a strong partnership with Coles over the last 20 years and this is an exciting next step for our business and our relationship. The acquisition means we will be able to accelerate our plans to grow the integrated fuel and convenience business while our customers continue to enjoy the excellent customer service provided by the dedicated Express team, the extensive product range in-store and the loyalty programs we know they love,” Viva Energy CEO and managing director Scott Wyatt said.
“Coles Express is a leading convenience retailer with considerable retail capability and experience. The acquisition of this business, and the establishment of an integrated fuel and convenience business unit, will put the Company in a strong competitive position to leverage our high quality networks and pursue long term growth opportunities in the fuel and convenience sector.”
Shares in COL are down 0.54 per cent to $16.66 per share at 10.10am AEST, while VEA is up by 3.42 per cent to $2.72 per share.
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