Loblaw sells chain of 213 gas stations to Brookfield for $540M
Analyst expects more gas station networks to be sold off until politicians step in to ensure competition
Loblaw is selling its network of 213 gas stations and attached convenience stores to a unit of TSX-listed Brookfield Business Partners for $540 milion.
The grocery chain announced the news in a release Wednesday morning. Brookfield plans to convert all of the stations to the brand name Mobil, which is well known in the U.S. and elsewhere but not in Canada thus far.
All of the stations are located next to Loblaw-owned retail grocery stores and they will continue to offer the company's loyalty program, PC Points.
The deal is expected to close in the third quarter of this year.
It's the second major move in the gas station industry to be announced in recent days, as Parkland Fuels announced earlier this week that it would be buying Chevron's line of Canadian stations for almost $1.5 billion.
And last year, Imperial Oil sold its remaining 497 Esso retail stations in Canada to five buyers for a total of $2.8 billion. Parkland was also one of the purchasers in that deal.
Last year, Parkland made a similar deal to purchase the Ultramar brand of gas stations.
While the Loblaws deal with the owner of the Mobil brand in Canada wasn't an oil company getting out of the gas business, it's part of a broader consolidation trend in the industry says Roger McKnight, chief petroleum analyst with En-Pro International in Oshawa, Ont.
"It's just going to keep on going," he said in an interview with CBC News. "The oil companies feel like the downstream side is pretty much inconsistent to a lot of political ... situations they don't like to be in."
Despite driver complaints about gouging, the retail margins on gasoline sales are actually quite low, which is why major oil companies are happy to get out of the business. "The reason they are so attractive to certain purchasers is that they rely on the convenience store sales," McKnight said. "The gasoline sales are almost a loss leader."
He expects more networks of gas stations to be sold off until politicians step in to ensure competition.
"As far as consumers are concerned, I'd get a little anxious as to why all the oil companies are getting out and leaving it to resellers," he said. "Sounds like there's going to be a shortage of competition as we roll along."
With files from the CBC's Meegan Read