September 30, 2016 / 12:30 AM / 3 years ago

UPDATE 2-Australia's Woolworths in talks over fuel station sale

(Recasts throughout, adds shares, analyst comment)

By Byron Kaye and Colin Packham

SYDNEY, Sept 30 (Reuters) - Australian supermarket giant Woolworths Ltd on Friday said it is considering offers to buy its petrol station chain in a deal said to be worth more than $1 billion, extending an asset sell-off as it shores up its core grocery business.

The sale would broaden a divestment programme under new Chief Executive Officer Brad Banducci as he refocuses on the grocery business, amid a price war with Coles, owned by Wesfarmers Ltd, and Germany’s ALDI Inc.

Caltex Australia Ltd, the co-owner of the chain, had hired investment bank UBS to help secure a deal valued at A$1.5 billion ($1.14 billion), The Australian newspaper reported earlier.

Woolworths, Australia’s top grocer by sales, said it had received several proposals which were “incomplete and conditional”. It declined to give further details.

Caltex and UBS declined to comment.

The prospect of an exit from the fuel business pushed Woolworths shares to their highest intraday level in a month on Friday, as the broader market fell as much as 1 percent.

“We don’t think that Woolworths should be a retail conglomerate. We would like to see it as a clean liquor and supermarket business, performing competitively against ALDI and Coles,” Clime Asset Management senior equities analyst David Walker said.

Woolworths last month said it would close its Master’s hardware chain and write off the losses, following years of criticism about the loss-making home improvement joint venture with U.S.-based Lowe’s Companies Inc.

Woolworths investors are concerned it is losing grocery sales to Coles, ALDI and others due to high shelf prices which it has used to subsidise losses elsewhere.

In May, S&P cut its long-term credit rating for the 92-year-old company, which together with Coles supplies most of the food Australians consume in their homes.

The potential sale of its more than 500 service stations also underscores the effects an oil price collapse is having on industries outside resources.

Last month, Woolworths blamed a one-fifth slump in its fiscal 2016 petrol sales for a slight fall in total group revenue, a factor it said was caused by declining global oil prices and a drop in comparable volumes. ($1 = 1.3108 Australian dollars) (Reporting by Byron Kaye and Colin Packham; Editing by Stephen Coates)

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