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Valero Energy Corporation Message Board

  • insurancefla1 insurancefla1 Oct 15, 2012 8:28 PM Flag

    Auction or spinoff? What are your thoughts?

    I realize VLO has been exploring an auction to sell its convenience stores for 3.5bill. News is forthcoming within the next two weeks, but as a shareholder i would prefer to see a spinoff and receieve shares.With 1,000 U.S. stores and some 775 units in Canada, has around $450 million in annual earnings before interest, tax, depreciation and amortization shares could fetch 11-15ps.
    Any thoughts?

    Sentiment: Strong Buy

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    • From what I have read, the inital plan was to split the company off that us shareholders would own via a tax efficient spin off. However, since that first announcement, a number of companies have been interested in buying all or parts of the retail chain. Valero's response to the new strategy: "we will consider the sale option provided the sales price exceeds the tax liability that they would not have incurred in the retail spin off"

      My feeling is like you, I would prefer to own the retail spin off but it looks like it is going to be a sale. So I would not expect a seperately owned retail stock. Valero's retail operation is operating in desirable areas of the country that have not had the full impact of the recession and are growing: Texas and Canada. Also, in Canada, their retail operations control the pricing of fuel in the region somehow.

      Parties possibly interested: 7-Eleven, owner of Circle K stores which is out of Canda, and private equity.

      Hopefully, assuming Valero does the sale option, they give us shareholders a portion of the sale via a one time special divivdend. Maybe they pay down some debt too.

      Hope that helps.


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