Valero Retail Unit Offers Notes - Analyst Blog

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U.S. refining company Valero Energy Corporation 's ( VLO ) 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 Antonio, Texas.

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) Delek US Holdings, Inc. ( DK ), Global Partners LP ( GLP ) and Inergy, L.P. ( NRGY ).



DELEK US HLDGS (DK): Free Stock Analysis Report

GLOBAL PARTNERS (GLP): Free Stock Analysis Report

INERGY LP (NRGY): Free Stock Analysis Report

VALERO ENERGY (VLO): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Stocks

Referenced Stocks: DK , GLP , NRGY , VLO

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