Sinopec Shortlists 37 for Sale in Retail Unit

China Petroleum & Chemical Corp. shortlisted 37 potential buyers as Asia’s biggest refiner seeks to sell a third of its retail unit to raise about $16 billion.

The company, known as Sinopec, is in talks to complete terms, Chairman Fu Chengyu said yesterday at a press conference in Hong Kong. The partners, which have to go through more rounds of selection before a final list is ready, will help Sinopec build one-stop service centers at its 30,000 fuel stations and 23,000 retail stores, he said.

“There is no doubt Sinopec’s retail business has great growth potential,” said Laban Yu, a Hong Kong-based analyst at Jefferies Group LLC. “Sinopec has wonderful ideas for how to develop its retail business online and offline but the key lies in execution.”

Sinopec is at the forefront of China’s push to restructure state-controlled companies and allow markets a bigger role in the allocation of resources. Under Fu, Sinopec and its parent have sought to evolve into a shareholding company with professionally-run, listed units handling businesses such as oil and gas exploration, engineering and oilfield services.

Fu will have more time to see his vision through as he will stay on as chairman for an unspecified period after reaching the official retirement age in July. In keeping with the larger goal, Sinopec’s oilfield services business may get merged with Sinopec Yizheng Chemical Co., he said, without giving specifics or a timeline.

Sinopec shares dropped 0.8 percent to HK$7.98 in Hong Kong today. The refiner posted a better-than-expected 7.5 percent increase in first-half profit to 32.5 billion yuan on Aug. 23.

Tencent Deal

Sinopec today added Tencent Holdings Ltd., Asia’s biggest Internet company, to its roster of partners for its fuel stations business, according to an e-mailed statement. It comes after Sinopec said Aug. 24 the unit would increase cooperation with ENN Energy Holdings Ltd.

The refiner is seeking to raise as much as 100 billion yuan ($16 billion) by selling about a third of its stake in China’s biggest fuel-station operator, people familiar with the matter said in July.

The retail unit, called Sinopec Sales Co., made a profit of 25.1 billion yuan on revenue of 1.5 trillion yuan in 2013. It will add convenience stores, car and financial services and advertising at its pumps, according to a Sinopec statement on June 30.

‘Gold Mine’

The unit is a “huge gold mine,” whose full potential “hasn’t been tapped,” Fu said on a conference call with analysts a month later.

China Taiping Insurance Holdings Co. became Sinopec’s first retail partner in May, when the insurer agreed to offer financial products at 1,500 convenience stores located at fuel stations by the end of the year.

Tencent will cooperate with Sinopec Sales in areas including mobile payment, media marketing, online-to-offline business, navigation and customer loyalty programs, according to today’s statement. Tencent runs China’s most popular instant message applications WeChat and QQ, which added a combined 321 million monthly active users in the second quarter -- more than the entire population of the U.S.

“It will make Sinopec a cool company and more appealing to younger generations by linking its business to a popular Internet company like Tencent,” Wu Fei, a Hong Kong-based analyst at Bocom International Holdings Co. said today.

E-Commerce Platform

Sinopec said on Aug. 21 that Sinopec Sales had partnered with for an e-commerce platform. The company also entered into an agreement with Taiwan’s Ruentex Group, an operator of convenience stores, earlier this month.

ENN Energy, a distributor of natural gas in China, will increase cooperation with Sinopec’s fuel-station business, it said Aug. 24. ENN currently operates about 60 LNG stations for trucks and large vehicles within Sinopec’s fuel-retail network and it plans to expand that nationwide, Vice Chairman Cheung Yip said yesterday.

ENN is looking closely at investing in Sinopec Sales, although its LNG agreement doesn’t mean it will buy a stake, Cheung said.

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