Valero Responds to Reports of Retail Selloff

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Valero Responds to Reports of Retail Selloff

By Melissa Kress, Convenience Store News - 09/27/2012

SAN ANTONIO -- Nearly two months after Valero Energy Corp. authorized its board to explore options for a separation of its retail business, media reports surfaced today stating that the company has decided to sell off its retail business through an auction.

A company spokesman, however, told CSNews Online that no final decision has been made yet regarding the future of Valero's retail arm. Bill Day, executive director of media relations at Valero Energy Corp., told CSNews Online that along with the July 31 directive to the board, the San Antonio-based company is still reviewing several potential separation transactions, including a tax-efficient distribution of the retail business to Valero's shareholders.

"That process remains underway. No decisions have been made, and options are still being evaluated," Day said. "A sale is one possible option, but a purchase price would have to be very substantial in order to surpass the tax savings inherent in a distribution to shareholders."

Day's response comes as Reuters is reporting that Valero is selling its retail business, which operates gas stations and convenience stores, through an auction with a possible $3.5-billion price tag. Citing sources familiar with the matter, the news outlet said the sale has drawn the interest of private equity firms and fellow convenience store operators.

Valero's retail business, which consists of nearly 1,000 U.S. stores and 775 units in Canada, has around $450 million in annual earnings before interest, tax, depreciation and amortization (EBITDA) and could sell for around eight times EBITDA, or about $3.5 billion, two of Reuters' sources said.

According to the report, Valero has sent financial information about the unit to interested parties and is expected to receive initial offers in October. Credit Suisse Group is advising the company on the retail split.

Several big private equity firms, including TPG Capital LP and Carlyle Group LP, are reportedly among the parties that are taking an initial look. C-store chains like Alimentation Couche-Tard Inc. and 7-Eleven Inc. would also likely have some interest, Reuters reported.