Exclusive: Total, Erg prepare sale of Italian petrol-station network - sources

LONDON/MILAN (Reuters) - French oil major Total TOTF.PA and Italian renewable energy group Erg ERG.MI have tapped banks to sell one of Italy's biggest petrol station networks, known as TotalErg, sources familiar with the matter said.

A logo for oil giant Total is seen at a petrol station in London February 12, 2008. REUTERS/Stephen Hird/File Photo

A sales process led by HSBC and Rothschild is expected to kick off in late September, the sources said.

Italy’s petrol station network is over-crowded, with around 21,000 stations across the country, twice the number in France and almost three times that in Britain.

The government has a draft bill before parliament seeking to cut the number of stations to bring them into line with demand and make the business more efficient.

The sale of TotalErg, a joint venture which controls close to 2,600 service stations in Italy with a market share of around 11 percent, comes after a similar move by Royal Dutch Shell RDSa.L in 2014.

Shell, which recently bought Britain’s BG Group, offloaded a network of 830 pump stations in Italy to Kuwait Petroleum International, though no price was disclosed.

Erg and Total are still to decide whether to hold on to some non-core businesses in Italy which have nothing to do with the petrol station network. These include refineries, lubricants and the sale of petrol-related products.

The deal could be valued at up to 700 million euros ($781 million), two of the sources said, depending on which assets will be auctioned off.

Total and Erg declined to comment.


The two energy firms have yet to formalize their plans to sell but four sources close to the deal said there is consensus to part ways.

Erg, which is controlled by the Garrone family, has repeatedly said the petrol station business is no longer core to its strategy as it seeks to refocus on renewable energy.

It hired HSBC earlier this year to prepare its exit while Total recently mandated Rothschild.

Created in 2010 through the merger of Total Italia and Erg Petroli, the joint venture is controlled by Erg with a 51 percent stake while Total holds the remaining 49 percent.

It ranks as Italy's fourth-biggest petrol station network after state-controlled ENI ENI.MI, IP Gruppo Api and Kuwait Petroleum International, according to industry body Unione Petrolifera in data that refers to end 2014.

In 2010, when the joint venture was launched, Erg’s former chief executive Alessandro Garrone said the parties agreed on a 30-year shareholder pact as they wanted a long-lasting agreement.

In 2015 TotalErg reported core earnings of 144 million euros while in the first six months of this year it posted core earnings of 53 million euros with debt of 246 million euros.

“A formal decision will be made in the coming weeks,” one of the sources said. “Discussions have been going on for several months, both parties want to sell out.”

The business has already drawn interest from private equity funds, the sources said, as they see scope for growth on the service side, especially catering.

It could also appeal to industry players that want a bigger footprint in Italy, two of the sources said.

Additional reporting by Arno Schuetze in Frankfurt and Bate Felix in Paris; editing by Susan Thomas