Ampol Secures EG Group’s Australian Network in $1.1 Billion Deal

After nearly 18 months of negotiations, Ampol has reached an agreement to acquire EG Group’s Australian fuel and convenience retail business for $1.1 billion. The portfolio, comprising around 500 sites formerly owned by Woolworths, will join Ampol’s existing network, taking its total Australian footprint to approximately 1,100 locations.

The deal, advised by UBS for Ampol and Bank of America for EG Group, will be funded with $800 million in cash (financed through debt) and $250 million in Ampol shares. Ampol expects the acquisition to deliver between $65 million and $80 million in cost-related synergies within the second year.

Why EG Group is Selling

EG Group, founded in 2001 by brothers Mohsin and Zuber Issa, has been under pressure from high debt levels and falling profits. The company has pursued an aggressive global acquisition strategy, growing to more than 6,000 sites across the UK, Europe, and the US. However, last year pre-tax profits dropped sharply from $US1.4 billion to just $US10 million.

This Australian divestment is part of a broader push to strengthen its balance sheet. In addition to this sale, EG has agreed to offload its Italian business for €225 million. The proceeds will help reduce its US$5.3 billion net debt.

Ampol’s Strategic Move

For Ampol, the purchase strengthens its position in the Australian retail fuel and convenience market. While there is increasing pressure on fuel retailers to diversify in light of the shift to electric vehicles, this move signals Ampol’s commitment to its core operations.

Ampol has a history with this portfolio, having been the underbidder when EG acquired it from Woolworths in 2018 for $1.7 billion. EG itself had previously made a $3.9 billion bid for Ampol’s convenience retail business in 2020, which was rejected.

The acquisition follows Ampol’s $2 billion purchase of New Zealand retailer Z Energy in 2021.

Regulatory and Operational Considerations

Sources suggest EG had been difficult to negotiate with and maintained high price expectations, while Ampol was initially deterred by perceived underinvestment in the network. It’s expected that some sites may need to be sold to satisfy competition regulator requirements.

The deal values EG’s Australian business at 5.8 times earnings before interest, tax, depreciation and amortisation (EBITDA), including debt. Ampol believes the expanded network will improve its retail earnings base and deliver significant operational efficiencies.