Caltex Australia Limited (ASX: CTX) today confirmed that it had made a conditional and confidential proposal to purchase Woolworths Limited’s (ASX: WOW) fuels business.

Obviously, the sale process is still ongoing so nothing has been set in concrete and Woolworths hasn’t yet made a final decision on its fuels business. It’s very likely that other interested parties could also have bid for the petrol station network, so Caltex is not necessarily the only bidder.

One thing appears certain though and that is that Woolworths is definitely looking to sell the petrol business.

That’s a different approach rival Wesfarmers Ltd (ASX: WES) is taking. The owner of Coles, Coles Express and its own network of 680 petrol stations and convenience stores appears to regard the division as a key business.

Woolworths fuel business could be worth up $1.5 billion, after it generated $4.6 billion in sales from 530 Woolworths petrol stations in the 2016 financial year.

Caltex also faces the prospect of having to get Australian Competition and Consumer Commission (ACCC) approval for the deal, given the petroleum company also has its own network of petrol stations. In 2010, the ACCC blocked Caltex’s bid for the former Mobil network, with 7-eleven picking up most of Mobil’s sites.

Caltex owns or leases 800 sites and supplies fuel to an additional 1,100 other sites, including the 530 owned by Woolworths.

According to The Australian, there were around 6,000 petrol stations in Australia in 2015, but that number has been growing as the big players expand their networks. Viva Energy licences the Shell brand in Australia and has more than 870 Shell-branded service stations. BP has more than 1,400 sites of which it operates 350 directly.

Other large players include 7-Eleven with around 600 stores, and Puma Energy. Puma has more than 270 sites.

Foolish takeaway

Even if Woolworths does accept the Caltex offer, there remains a high risk that the ACCC will knock the deal on its head. That could see one of the smaller players like 7-Eleven, Viva or Puma pick up more sites.

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Motley Fool writer/analyst Mike King owns shares in Wesfarmers and Woolworths. 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.