Two steps remain before spinoff can be completed.
Valero Energy Corp.’s planned spinoff of its convenience stores remains set to occur during the second quarter of 2013, Valero Chief Financial Officer Mike Ciskowski told the audience at a luncheon sponsored by the Association for Corporate Growth’s Central Texas chapter.
But before the spinoff can get underway, two steps still need to be completed.
First, Valero needs a “private letter ruling” from the IRS confirming that shares in the spinoff company, CST Brands Inc., can be treated as a tax-free distribution to shareholders, reported San Antonio Express-News Online.
It can take between 4-6 months to obtain such a private letter, and Valero is in month five.
Once the letter arrives, Valero just needs final approval from its board before the spinoff can get rolling.
When San Antonio-based Valero announced the spinoff last year, it said 80% of CST Brands’ common shares would go to Valero stockholders when the separation is complete. Valero plans to sell the remaining 20% 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 with almost 1,900 sites in the U.S. and Canada, reported San Antonio Express-News Online.
“Why are we doing this? Investors and analysts have been treating Valero mainly as a refiner, and rightly so,” Ciskowski said, noting that in doing so, “they are ignoring the higher potential value” of the convenience 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, who oversees the company’s retail operations, will become CEO of CST Brands when the separation is completed.