Sinopec Corp. reveals its plan to sell $17.5 billion shares of its retail business to private companies.
The company's move is allegedly the Chinese government's strategy to restructure the China's several state-owned companies.
The company's move will hopefully bring investors who would bring growth and vitality in the company's retail unit, as it is currently has a low level of profit.
Sinopec will give the shares of its retail unit to 25 different wealthy companies like insurers and funds to raise 107.1 billion yuan.
In return, the investors will acquire almost 30 percent shares of the retail unit of the Oil behemoth. The shares include ownership of a wholesale business, more than 30,000 petrol stations and over 23,000 convenience stores, oil pipelines and storage facilities.
The Oil Company will use the earnings from the deal to finance its fuel retail business and pay debts to its parent company, according to Chai Zhiming, deputy chief executive of the retail unit.
Over 99 percent of the company's sales rely on petrol, so the company will have to divert its attention to non-fuel services in order to boost efforts to improve its other businesses like convenience stores, fast food chains and car washes.
The capital will help renovate convenience stores, partner up with different businesses, boost its car wash and other automobile services.
Investors in the deal include Harvest Fund Management Co. Ltd, one of China's biggest asset managers. The financial firm was reported to shell out 15 billion yuan in the deal.
Other investors include People's Insurance Group of China Co. Ltd. and Tenecent Holding Ltd. giving 10 billion yuan stakes.
Analysts state that Sinopec needs to burn the midnight oil in order to fully improve the company.
The market is full of competitors and rising labor and rental costs will reportedly hurt Sinopec in the process.
Analysts also view the move as an attempt by the company's chairman to revive a deteriorating business.
The company needs capital to strengthen its finances and investment strategies in exploration and production.
