A range of businesses have been short-listed to bid for part of a 30 percent stake in China Petroleum's Chemical Corporation’s (Sinopec’s) petrol station operating subsidiary Sinopec Sales valued at $16 billion, Reuters reported on Aug. 19.

Canadian retailer Alimentation Couche-Tard, Chinese tech group Tencent, China Life Insurance, Chinese energy distributor ENN Energy, and private equity firms Fosun Group, Hopu Investment Management, and Affinity Equity Partners have all made it to the final round of bidding. Final bids are due by the end of August.

Sinopec said on Jan. 19 that it would restructure the company’s marketing division and allow up to a 30 percent private investment. Sinopec Sales’ assets include over 30,000 petrol stations and 23,000 “Easy Joy” convenience stores.

The group said it wants outside capital to help modernise its petrol station and convenience store business and sales management system. It also wants to expand from supplying fuel to providing services.

Sinopec Sales said on July 29 it signed a co-operation framework agreement with Taiwanese conglomerate Ruentex. The groups will pool procurement, which should reduce buying costs for Sinopec’s convenience stores, according to a Sinopec statement. Ruentex will also pilot joint management of Shanghai-based convenience stores, as well as explore e-commerce cooperation. Ruentex is part owner of Chinese hypermarket operator Sun Art Retail.

Sinopec petrol sale attracts a motley bunch

Sinopec’s petrol station stake sale could drum up a mixed bunch. The Chinese oil giant is seeking investors to help develop Sinopec Sales, which operates its vast network of filling stations. Prospective buyers from food retail, energy, technology and private equity have been shortlisted, according to Reuters. But the price tag of around $16 billion for a 30 percent stake could force them to club together.

Motley crude

Sinopec Sales operates 30,000 petrol stations. Energy distributors like ENN may see some logic in owning more of China’s fuel delivery network. Yet buyers from a range of other industries see greater potential in developing additional sources of income.

Take retail. Though Sinopec Sales has 23,000 Easy Joy convenience stores, these currently bring in just 1 percent of the group’s revenue. Boosting that figure could be lucrative: for established retailers, profit margins on non-fuel sales are three times higher than the 1.7 percent Sinopec Sales squeezes out at the moment. That explains why Alimentation Couche-Tard, the Canadian owner of Circle K convenience stores, is on the shortlist.

Logistics and technology groups have other reasons for getting involved. Petrol stations could act as collection points for online parcels handled by delivery groups like S.F. Express. Internet giant Tencent, meanwhile, might be interested in Sinopec’s fuel payments network.

A big investment will require a large consortium. At the mooted valuation, a $1 billion cheque would buy no more than 2 percent of Sinopec Sales. Not many companies can justify tying up that much capital in what could prove a passive stake in the unlisted subsidiary of a Chinese state-owned enterprise. Besides, not all investors will get a voice: Sinopec Sales is offering just three seats on an 11-member board to outside investors, according to Bernstein analysts.

Prospective investors will also have to grapple with factors beyond their control. Boosting non-fuel revenue and margins could lift the unit’s valuation in an initial public offering. But Beijing, which regulates fuel prices, has the power to wipe out any revenue gains with the stroke of a pen. Whatever the final roster, outside investors will need to stick together to make the deal work.