Tencent makes shortlist in $16b Sinopec unit sale

China's Tencent Holdings Ltd and Canadian retailer Alimentation Couche-Tard Inc are among suitors shortlisted to buy a $16 billion minority stake in China's Sinopec Sales, the world's largest fuel retail network, Reuters reported on Tuesday, citing people familiar with the matter.

China Life Insurance Co Ltd, the nation's biggest insurer, Hong Kong-listed ENN Energy Holdings Ltd, privately owned Fosun Group, Hopu Investment Management and Affinity Equity Partners have also progressed to the next round, said the people who declined to be identified.

State-run China Petroleum & Chemical Corp, or Sinopec, plans to sell up to 30 percent of Sinopec Sales by the end of 2014 as the Chinese government restructures State-owned assets. Sinopec Sales booked a net profit of 25.1 billion yuan ($4.1 billion) in 2013 from over 30,000 service stations and more than 23,000 convenience stores.

While a deal would give investors little control over the company, a likely exit through an IPO planned within three years has attracted a wide range of suitors, the people said.

The company also wants to boost non-fuel sales and is seeking investors to get into businesses such as car services and advertising, the sources added.

Sinopec Sales generated 1.49 trillion yuan in revenue in 2013, but non-fuel sales contributed less than 1 percent of the total. In the US, for example, non-fuel retail sales account for about half the profit for gas stations.

Final bids are due by the end of August, though it was not clear how many shortlisted bidders are likely to make offers. Couche-Tard and ENN are both bidding solo, as is privately owned Chinese investment company New Hope Group, the people said.

Local companies, however, are likely to be given priority as per the government policy to share the "dividend" of China's economic growth, Sinopec chairman Fu Chengyu has said.

Financial investors, like Affinity, Hopu and China Life would be interested in Sinopec Sales because of its stable yields, which Barclays estimates are between 3 to 4 percent.

Couche-Tard, which operates more than 6,000 convenience stores in North America, also runs about 4,200 stores under the Circle K brand in China, Japan, Mexico, and other countries and regions.