Valero confirms retail spinoff set for mid-year

Valero Energy Corp.’s planned spinoff of its retail stores remains on track to occur during the second quarter, Valero Chief Financial Officer Mike Ciskowski said at a Tuesday luncheon sponsored by the Association for Corporate Growth’s Central Texas chapter.

Valero is waiting on a “private letter ruling” from the IRS that would confirm that shares in the spinoff company, called CST Brands Inc., can be treated as a tax-free distribution to shareholders, he said.

“It’s just a process to go through,” Ciskowski said. “It just takes a long time.”

Typically, it takes four to six months to get a private letter ruling from the IRS, “and we’re in month five. So we have a little bit of time. I think we’ll get it.”

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Company spokesman Bill Day said that, should the company receive the letter from the IRS, the only remaining hurdle to the retail separation is a final vote of approval from Valero’s board.

When San Antonio-based Valero announced the spinoff last year, it said 80 percent of CST Brands’ common shares would go to Valero stockholders when the separation is complete. Valero said it would sell the remaining 20 percent of CST’s outstanding shares over an 18-month period.

CST Brands is expected to become one of the largest independent retailers of transportation fuels and convenience merchandise in North America, Ciskowski said, with almost 1,900 sites in the United States and Canada.

It is to be a San Antonio-based company that will trade on the New York Stock Exchange.

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“Why are we doing this? Investors and analysts have been treating Valero mainly as a refiner, and rightly so,” Ciskowski said. But in doing so, “they are ignoring the higher potential value” of the retail stores.

“We expect our retail business to trade at similar valuations to other retailers,” he said, which would add about $2 billion to total shareholder value.

Valero has said that Kim Bowers,currently in charge of the company’s retail operations, will become CEO of CST Brands when the separation is completed.