U.S. refining company
Valero Energy Corporation
) retail unit, CST Brands, Inc. announced an offering of $550
million senior notes in connection with its impending spin-off.
The senior notes due 2023 would be initially issued to Valero and
subsequently offered for sale to third parties.
Once the spin-off is complete, CST Brands is touted to be one of
the largest independent retailers of motor fuels and convenience
merchandise in the U.S. and eastern Canada with nearly 1,900
sites and 12,000 employees. The new company would be based in San
In the first week of Apr, the board of directors of Valero
approved the spin-off with the aim of creating better value for
shareholders. The distribution of 80% of outstanding CST shares
to Valero shareholders is expected to take place on May 1, 2013
in a tax-free transaction. The remaining 20% of CST will be held
by Valero for six months, after which it will contemplate on
farming-out based on market conditions.
Valero shareholders will receive one share of CST Brands common
stock for every nine shares of Valero common stock held as of the
record date of Apr 19, 2013. The fractional shares of CST Brands
common stock will not be distributed. However, the distribution
agent will aggregate fractional shares into whole shares and sell
these in the open market at current rates. The net cash proceeds
will be distributed on a pro rata basis to each shareholder, who
would otherwise have been entitled to receive fractional shares.
Valero is the largest independent refiner and marketer of
petroleum products in the U.S. It has a refining capacity of 2.8
million barrels per day across 14 refineries located throughout
the U.S., Canada and the Caribbean. Valero is also a leading
ethanol producer with 10 ethanol plants in the Midwest that have
a combined capacity of 1.2 billion gallons per year. Valero
organizes its business into three reportable segments - Refining,
Ethanol and Retail.
Valero is scheduled to release its first quarter 2013 earnings
results on Apr 30, before the opening bell. The Zacks Consensus
Estimate for the first quarter is pegged at $1.01 representing a
year-over-year improvement of 224.57%.
Valero holds a Zacks Rank #3, which is equivalent to a short-term
Hold rating. Other energy sector stocks that are expected to
significantly outperform the equity markets in the next one to
three months are Zacks Rank #2 (Buy)
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