* Sinopec Sales will have about $53-66 bln in equity value
* Final bids are due by August end
* Suitors betting on exiting through IPO of the business
(Adds analysts comment, details of bidders, Breakingviews link)
By Denny Thomas and Heng Xie
HONG KONG/BEIJING, Aug 19 Canadian retailer
Alimentation Couche-Tard Inc and China's Tencent
Holdings Ltd are among suitors short-listed to buy a
$16 billion minority stake in China's Sinopec Sales, the world's
largest fuel retail network, people familiar with the matter
China Life Insurance Co Ltd, the nation's
biggest insurer, Hong Kong-listed ENN Energy Holdings Ltd
, privately-owned Fosun Group, Hopu Investment
Management and Affinity Equity Partners have also progressed to
the next round, said the people who declined to be identified as
the sale process is confidential.
Formally known as China Petroleum & Chemical Corp
, state-run Sinopec plans to sell up to 30 percent of
Sinopec Sales by end-2014 as Beijing restructures
government-owned assets. Sinopec Sales booked a net profit of
25.1 billion yuan ($4.1 billion) in 2013 from over 30,000
service stations and more than 23,000 convenience stores.
While a deal would give investors little control over the
company, a likely exit through an initial public offering
planned within three years has attracted a wide range of
suitors, the people said.
The company also wants to boost non-fuel sales and is
seeking investors to get into businesses such as car services,
telematics, online-to-offline sales, financial services and
advertising, the sources added.
Sinopec Sales generated 1.49 trillion yuan in revenue in
2013, but contribution of non-fuel sales was less than 1 percent
of the total. In the United States, for example, non-fuel retail
sales accounts for about half the profit for gas stations.
Sinopec, ENN, Affinity, Tencent, China Life and Fosun all
declined to comment about the bidding process.
Couche-Tard CFO Raymond Paré also declined to comment and
New Hope and did not reply to emails seeking response. Hopu
could not be reached for an immediate comment.
Final bids are due by end-August, though it was not clear
how many shortlisted bidders are likely to make offers.
Couche-Tard and ENN are both bidding solo, as is privately owned
Chinese investment company New Hope Group, the people said.
Local companies, however, are likely to be given priority as
per the government policy to share the "dividend" of China's
economic growth, Sinopec chairman Fu Chengyu has said.
Financial investors, like Affinity, Hopu and China Life
would be interested in Sinopec Sales because of its stable
yields, which Barclays estimates between 3-4 percent.
Couche-Tard, which operates more than 6,000 convenience
stores throughout North America, also runs about 4,200 stores
under the Circle K brand in China, Japan, Mexico, Vietnam and
Tencent Holding is China's largest listed Internet company
and a successful deal will give it access to Sinopec's fuel
The planned divestment comes at a time when Sinopec's
domestic fuel sales growth rate has slowed due to falling
demand. Gross margins shrank to 2.3 percent in 2013 from 3.3
percent in 2011 and Barclays said in a report that a $1 fall in
fuel margin from the current high level of $15-16 per barrel
could lower Sinopec Sales net profit by 16 percent.
The sale is expected to generate between $16-20 billion for
Sinopec, money which Asia's biggest refiner may use to pay down
some of its debt and to reinforce upstream investments. If
successful, the sale would mark Asia's second-biggest M&A trade
this year, after CITIC Pacific's $36 billion purchase
of its parent CITIC Group's assets.
The deal is set to value Sinopec Sales at between $53-66
billion, giving it a price-to-earnings multiple of 13-16.3,
according to Reuters calculations.
Sinopec unveiled plans in February to restructure the
business, which also includes oil-products pipelines and storage
facilities across China.
Advising Sinopec on the sale are China International Capital
Corp, Deutsche Bank, CITIC Securities Ltd
and Bank of America.
(Additional reporting by Charlie Zhu, Matthew Miller, Euan
Rocha and Allison Lampert; Reporting by Denny Thomas, Heng Xie
and Stephen Aldred; Editing by Kenneth Maxwell and Miral Fahmy)