Our largest supermarket group may have a new "Plan B" for its petrol business following media speculation that some UK buyers are sniffing around the asset.
Its reported that London-listed DCC Plc is running a ruler over the Australian petrol stations owned by Woolworths Group Ltd (ASX: WOW) as they would be complementary to DCC's portfolio of assets that spans LPG and commercial fuel sales to healthcare and technology businesses, according to the Australian Financial Review.
The news comes as Woolworth's management is undertaking a soft marketing push to fund managers for an initial public offer (IPO) of the petrol division after the Australian Competition and Consumer Commission blocked the sale of the circa $2 billion business to BP.
There's nothing like competitive tension to bring out the best price for the asset but shareholders shouldn't get too excited just yet.
While DCC has a propensity to grow-by-acquisitions, it probably doesn't have the firepower to swallow Woolies' fuel business whole.
The conglomerate has a little over £1 billion ($1.8 billion) in cash and £1.7 billion in debt on its balance sheet as it posted an adjusted operating profit of £383.4 million for the year ended March 2018.
DCC's website claims its oil business is the market leader in the UK and Denmark, while its LPG business is number two in France, UK and Ireland. The company sold 12.3 billion litres of fuel last year to 900,000 customers across more than 1000 sites in Europe.
In contrast, Woolworths' petrol stations sell 3.6 billion litres of fuel a year across 534 sites.
But the AFR believes DCC isn't the only potential buyer having a look. Fellow UK petrol and convenience retailer EG Group is also reported to be doing due diligence on the business. EG has 3,600 sites across the UK, France, Benelux, Italy and the US. Its fuel retail brands include Esso, BP, Shell and Texaco.
You can't rule out a private equity buyer emerging either given that the sector is flushed with cash and hungry for acquisitions.
This is a great time to be selling assets and Woolworths isn't the only one undertaking a large divestment.
Wesfarmers Ltd (ASX: WES) is looking to spin-off its Coles supermarkets, while logistics group Brambles Limited (ASX: BXB) is offloading its IFCO reusable plastic container business and BHP Billiton Limited (ASX: BHP) has just sold its US shale assets for US$10.8 billion – just to name a few.
This is a bullish development in my view as companies selling assets tend to excite the market due to the prospect of a capital return or shareholders getting shares in a new company.
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