French oil, gas and chemical giant Total SA (NYSE: TOT – $54.85) said that it has agreed with Brazilian company Grupo Zema to acquire its fuel distribution company Zema Petróleo, its reseller and retailer arm Zema Diesel as well as its importation company Zema Importacao. Zema Petróleo currently manages an extensive branded network of 280 dealer-operated service stations and several oil products and ethanol storage facilities, most of them located in the states of Minas Gerais, Goiás and Mato Grosso. It is also carrying a supply activity to third-party retail stations in the same regions. With this acquisition, Total is stepping into the largest South American market for the retail of fuels and into the worldwide second largest low-carbon biofuels market. The company intends to expand its activities in the area with the objective to double the number of branded stations within five years, particularly throughout the Southeast and Central-West regions in Brazil. The rebranding to the Total name of the current service stations will start in 2019 and new flagships stations will be open on selected locations. Total will offer Brazilian consumers and business customers the company’s full lineup of fuels, including its Total Excellium premium fuel, high-tech lubricants and a broad range of products and services.
TOT ADRs have pulled back in price as Brent crude prices have plummeted over the past several weeks, and now offer decent upside potential. Also, the company’s rich $2.95 dividend yields 5.5% at current quotations and thus provides for very attractive total returns over the 3- to 5-year stretch.