Woolworths Limited (ASX: WOW) has confirmed that it is considering selling its petrol business.

The supermarket retailer says that it has received a number of proposals from interest parties to either buy the business or develop an enhanced convenience and loyalty offer to its customers.

But according to The Australian, Caltex Australia Limited (ASX: CTX) is in the final stages of negotiations to buy Woolworths’ $1.5 billion portfolio of petrol stations.

Back in August, the Australian Financial Review (AFR) reported that investment bank Morgan Stanley had been hired by the retailer to sell its petrol station business – at the time valued between $1.3 billion and $1.5 billion.

Woolworths’ petrol division had $4.6 billion of sales in the 2016 financial year from 530 Woolworths petrol stations.

The move comes as new CEO Brad Banducci looks to rationalise and turnaround the core supermarkets division, after years of underperforming its main competitor Coles – owned by Wesfarmers Ltd (ASX: WES).

Woolworths has separated out its liquor division into Endeavour Drinks Group, is disposing of its Masters home hardware business and has slashed prices in its code supermarkets division to attract customers back into its stores.

Caltex, in the meantime, has transformed itself from an oil refiner into a petroleum products retailer, following the transformation of its Kurnell oil refinery into an import terminal. The company supplies fuel to 1,971 sites, including 800 Caltex-owned or leased sites, 522 owned by Woolworths and 653 dealer-owned.

It’s not yet a done deal yet though, and will likely require approval from the Australian Competition and Consumer Commission (ACCC).

Foolish takeaway

Should Woolworths sell its petrol stations, it’s a move unlikely to be followed by Coles, with the former trying to shrink itself to improved growth. But it should be good news for shareholders, bringing in much-needed revenues and it will be one less business the company needs to focus on, particularly given its low margins.

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Motley Fool writer/analyst Mike King owns shares in Woolworths and Wesfarmers. You can follow Mike on Twitter @TMFKinga

The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.