BP takes lead in European petrol retailing with £4bn German deal

BP overtook Royal Dutch Shell as Europe's biggest petrol retailer yesterday after agreeing a £4bn deal to take control of Germany's largest forecourt operator Aral from the utility group E.On.

The deal will increase BP's share of the European market to about 16 per cent and give it 25 per cent of all German petrol sales through a network of more than 3,500 filling stations.

The agreement, thrashed out over the past four months, will see BP, Britain's biggest company, swap its 25.5 per cent holding in the German gas distributor Ruhrgas for a majority stake in E.ON's Veba Oil, the owner of the Aral brand. BP has also agreed to pay E.On $1.63bn (£1.2bn) in cash and assume debts of $950m.

E.On said the deal valued Veba Oil at 6.5bn euros (£4bn). However, BP put the net value of the deal at nearer £1.5bn and explained it expected to raise around $2bn (£1.4bn) by selling off Veba's upstream oil and gas interests.

Lord Browne of Madingley, BP's chief executive, described the deal, as a "happy co-incidence of interests" because BP had been trying to sell its Ruhrgas stake for a decade and E.On has to dispose of its non-utility interests to gain regulatory approval in the US for its acquisition of Powergen.

The merger of Aral with BP's own chain of petrol stations in Germany will lead to about 1,500 job losses from the combined workforce of 14,000 and produce annual cost savings of $200m. BP will convert its 950 stations in Germany to the Aral brand but Aral stations outside Germany will be rebranded BP.

The deal will be investi-gated by the European Commission's competition authorities, which could then force BP to dispose of some of the petrol stations.

But Lord Browne, who takes up his seat in the House of Lords tomorrow, said he did not believe there would be any regulatory objections. "We are confident of our position but you can never assume the outcome of any competition review," he said.

The deal will fill one of the few big holes in BP's European coverage. The only other major petrol market where it lacks a presence is Italy. Aral has 2,560 petrol stations, making it Germany's most popular brand with 18 per cent of the market. Last year, Veba Oil made pre-tax profits of 733m euros (£446m) from its refining and marketing operations, making them much more profitable than BP's operations in the UK.

Lord Browne said margins were higher in Germany because filling stations there sold bigger volumes of petrol and a much wider range of general merchandise through mini convenience stores. Petrol duty is also lower in Germany than in the UK.

The deal will increase E.On's stake in Ruhrgas to just less than 30 per cent and give it a platform from which to bid for control of the company.

BP and E.On began talks in March around the same time as the German company announced the takeover of Powergen.

Initially, BP will take a 51 per cent stake in Veba Oil and E.On will take a 51 per cent stake in Gelensburg, the holding company that owns BP's stake in Ruhrgas.

But each company has the right to buy out the other's minority stakes in the second quarter of next year under a series of 'put' options.