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Shell to Sell 25% Of Its UK Petrol Stations

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By: MICHEAL KAUFMANPublished: Apr 14, 2015 at 8:11 am EST

Royal Dutch Shell plc (ADR) (NYSE:RDS.A) has agreed to sell 25%, or 185, of its petrol stations in the UK. The sale of the petrol stations is part of the company’s cost-cutting strategy amid the declining crude oil price. Another strategy of the company is to grow its fuel dealer network instead of owing the retail outlets directly.

As reported by the Guardian, last year in September, Shell had indicated intentions of selling 250 of its petrol stations and cutting the total number of 1,000 petrol stations it owned by 50%.

Shell will sell 90 petrol stations to Motor Fuel Group, while 68 petrol stations will be sold to Euro Garages. The handover of these petrol stations to the new owners is expected to occur by the end of 2015. The oil company expects to exchange contracts on the remaining service stations in the coming week.

The company has not specified the value of its sales and indicated that the new owners of these petrol stations will sell the fuel under Shell’s name for five years after the sale.

Motor Fuel Group owns 280 petrol stations and sells brands under the name of Texaco, Jet, and brands of BP plc (ADR) (NYSE:BP) as well. Euro Garages owns around 200 stations and sells some brands under the name of Shell.

Shell’s Northern-Europe Retail General Manager David Moss was pleased with the deal. He saw this as an opportunity for Shell and the dealers to grow their businesses and offer top-quality customer service.

As reported by the Guardian, both Motor Fuel and Euro Garages will provide with the investments vital for the development of the stations. Both the dealers in the past have been buying out petrol stations from major energy companies that are aiming to cut back on their spending. After the buyout, the dealers will add more investments by adding food and retail outlets in addition to the basic petrol service.

Shell’s strategy of selling of these petrol stations is seen as a complete reversal from its 2011 strategy. Back then the company had acquired 254 retail sites from Rontec Investments for £250 million.

Shell has recently finalized its merger with BG Group plc (ADR) (OTCMKTS:BRGYY) for a $70 billion cash-and-share deal. It would be looking to fund the mega deal with the sale of its petrol stations.

As reported by the Guardian, Motor Fuel’s Managing Director Jeremy Clarke said: “We are delighted to be bringing another major brand to the MFG network. This acquisition gives us 90 high-volumes, quality stations that reinforce our commitment to become one of the most dynamic and profitable independent forecourt operators in the UK.”

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