Woolworths Limited to sell petrol stations

Woolworths Limited (ASX: WOW) is expected to announce the imminent sale of its petrol stations business according to media reports today.

According to the Australian Financial Review (AFR), Morgan Stanley has been hired to sell Woolworths’ petrol station business.

ASX-listed Caltex Australia Limited (ASX: CTX) is likely to be interested, being a partner in the business and supplying fuel. Caltex has transformed itself from a petroleum refiner into a petroleum products retailer after converting its Kurnell refinery into an import storage facility.

Caltex still has its Brisbane Lytton refinery, but most of its revenues now come from the sale of petroleum products. Other major petrol retailers like Puma Energy and Vitol are also reported to be interested, as is BP as revealed by the AFR in May 2016.

Puma operates 405 retail sites across Australia, following a series of acquisitions since it entered the country in 2013. It is now Australia’s largest independently-owned fuel company.

Vitol is one of the world’s largest oil traders according to Bloomberg.

Woolworths runs around 521 petrol stations, with sales of around $2.5 billion in the last half year. But the business is struggling as competition increases as more stations are opened and falling fuel prices, resulting in sliding same store sales.

The struggling supermarket retailer is desperately trying to turnaround its core business, with plans to jettison its underperforming hardware business, and potentially other non-core businesses such as EziBuy and there are even rumours about Big W.

Rival Wesfarmers Ltd (ASX: WES) is likely rubbing its hands together with glee. The company operates 685 of its own petrol stations under the Coles Express brand in conjunction with oil giant Shell. Having seen off Woolworths in hardware, it must be nice to see off its rival in the petrol and convenience store sector as well.

Foolish takeaway

There’s no official announcement from Woolworths yet, but might not be far away. The market should like the news – if and when it does come – which should see Woolworths’ share price rise higher from its current level of around $23.00.

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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.

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