U.S. refining company Valero Energy Corporation (VLO) announced that it has received an approval from its board of directors with respect to the spin-off of its retail business, CST Brands, Inc.
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 the whole shares 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. Last year, Valero had proposed to search for alternatives for the gasoline and convenience stores it owns in the United States and Canada, including the spin-off of its retail unit.
Valero remains on track with its strategy of boosting its shareholders’ value, much like ConocoPhillips (COP), Hess Corporation (HES) and Marathon Oil Corporation (MRO).
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 holds a Zacks Rank #3, which is equivalent to a short-term Hold rating.
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