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Caltex sells bitumen business

Oil importer and refiner, Caltex Australia (ASX: CTX) has agreed to sell its Sydney-based import bitumen business to Puma Energy, a subsidiary of commodity trading firm Trafigura Beheer.

Caltex managing director Julian Segal said in an announcement today, “Caltex’s strategy is to remain Australia’s leading transport fuels player. As bitumen is a by-product of refining, while we had an operating base oil refinery at Kurnell (Sydney), having the bitumen business made sense. Going forward, however, bitumen is no longer deemed to be a core business.” He added, “The decision to invest is consistent with our strategy and it makes operational and financial sense.”

Caltex says the deal is confidential, and hasn’t released the terms of the sale including the price.

Puma Energy is Australia’s largest independent petrol retailer, after purchasing Ausfuel for $625 million and appears to be interested in United Petroleum. United operates a chain of petrol stations across Australia, as well as fuel import terminals in several states and could sell for as much as $1 billion. United also sells bulk fuel products to other customers.

Currently Woolworths (ASX:WOW) and Wesfarmers (ASX:WES) owned Coles control around 50% of the petrol market with Caltex holding 17%. BP, 7-Eleven and the independents share the leftovers.

It seems Trafigura is positioning Puma Energy to be a major player in Australia’s petroleum marketing, distribution and sales, and building a portfolio of substantial petroleum assets. It may be a good move, with Australia forced to import the majority of its petroleum. Around 85% of input to refineries is sourced from imports according to the Bureau of Resources and Energy Economics (BREE).

The purchase of Caltex’s bitumen business also gives Puma exposure to the road construction industry and would benefit from an increase in Australia’s infrastructure spending, which appears to be on the cards.

Foolish takeaway

Caltex is moving out of the refining business to focus on its marketing and distribution of petroleum products. The sale of its bitumen business appears to be a win-win situation for both Caltex and Puma Energy.

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

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