This article is from the Australian Property Journal archive
VIVA Energy will acquire Coles Express to establish Australia’s largest fuel and convenience network under a single operator.
Purchasing Coles Group’s convenience retailing business and infrastructure for a headline consideration of $300 million, will see Viva Energy grow its network to 710 sites nationally.
The acquisition will result in an early end of Viva’s fuel and convenience Alliance Agreement with Coles Group, which was originally due to end in 2029
“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,” said Scott Wyatt, CEO and managing director at Viva Energy.
“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.”
The purchase will be funded by cash and available debt facilities, with the net impact expected to be $143 million after settlement of existing agreements and working capital benefits.
Viva Energy also holds 92 sites in the regionally focused Liberty Convenience, meaning its network of fuel and convenience assets spans both metro and regional, as well as on main transport routes.
At 3.7%, Coles Express convenience sales growth in the last seven years have exceeded the national average annual growth of 3.1%.
“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,” added Wyatt.
Coles Express will be transitioned and operated as an independent business unit within the Viva Energy Group to establish a focused retailing organisation to lead the company’s broader fuel and convenience strategies.
“We welcome around 6,000 Coles Express team members to the Viva Energy group and look forward to working with them to build exciting new fuel and convenience offers and consolidate our position as a leading retailer in Australia. We will continue to work closely with Coles through the transition and beyond through an ongoing relationship,” said Wyatt.
With Coles Group supporting the transition of Coles Express’s retail capability and infrastructure, the group will remain as a support partner through transitional arrangements, ongoing convenience supply chain services, and continuity of existing loyalty programs, including 4cpl discount dockets and Flybuys.
“This agreement is positive not only for Coles and Viva Energy, but also for our customers, team members and respective shareholders,” said Steven Cain, CEO at Coles.
“Viva Energy 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.”
The transaction will deliver $1.14 billion of convenience store sales revenue on a FY2021 pro-forma basis, partially offset by the elimination of $160M of non-fuel income previously received from Coles Group.
This in addition to approximately $45 million to $70 million to FY2021 Retail EBITDA on a pro-forma post integration basis and corresponding EPS accretion of 11% to 18% relative to FY2021 based on a pro-forma, post-integration basis, before synergies.
Executive general manager of the Viva Energy Retail business, Megan Foster, will lead a team established to work with Coles to manage the transition.
The transaction is expected to be completed in the first half of 2023.
“We are thrilled to progress our strategic agenda and begin a rewarding journey with our partners, customers and team members,” concluded Wyatt.
