China Petroleum & Chemical Corp. (Sinopec) registered its largest daily decline in more than three years after revealing that it intends to sell a stake of its fuel-retailing unit at the price of CNY107 billion ($17.5 billion), which was lower than the one initially expected by analysts.
Sinopec, as the company is more commonly known, shared that it plans to sell nearly 30% in its sales-and-marketing business called Sinopec Sales, which has 80 million gas-card holders, to 25 investors including Tencent, Fosun and China Life Insurance. The company will hold on to 70.01% of the retail division, which currently operates more than 30 000 gasoline stations and 23 000 convenience stores in some of the most profitable areas on the territory of China.
The company is to sell the stake to a group of mostly domestic investors, and is still far from opening the oil industry to foreign companies. Still, Sinopecs Chairman Fu Chengyu said earlier in 2014 that the sale is planned to be made available to both domestic and overseas investors. In August, Sinopec was in negotiations with 37 bidders for the stake in its retail business.
The sale comes at a moment when the Chinese government is seeking to reorganize state-run companies. At the moment, the retail business of Sinopec runs the largest network of fuel stations in the country.
Mr. Gordon Kwan, who heads oil and gas research at Nomura International Hong Kong Ltd., said in a telephone interview for Bloomberg: “The retail business is a big cash cow with the potential to increase margins. There is a lot of scope to make the business better.”
China Petroleum & Chemical Corp. fell by 6.76% on Monday, the most in more than three years, to close at HK$7.25 per share in Hong Kong, marking a one-year change of +19.83%. The company is valued at HK$852.26 billion billion.
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