Valero to Spin Off Retail Division in Second Quarter
SAN ANTONIO -- Valero Energy Corp. will spin off its retail division in the second quarter of this year, assuming it receives favorable rulings from the Internal Revenue Service (IRS) and the Securities and Exchange Commission (SEC), the company stated today during its fourth quarter 2012 earnings call.
Valero announced that the retail spinoff, which will operate nearly 1,900 convenience stores and gas stations, including 1,032 in the United States, will be named CST Brands Inc. Earlier reports said the new company would be called Corner Store Holdings Inc., but Valero decided to shorten the name.
Its retail locations, however, are expected to maintain the Valero Corner Store banner.
CST Brands will trade under the ticker symbol CST on the New York Stock Exchange. Once approved by the IRS and SEC, Valero will spin off 80 percent of CST Brands to shareholders, receiving $1.1 billion in exchange.
As for the remaining 20 percent of CST Brands, Valero said it intends to sell that portion of the new company within 18 months.
Valero Chairman and CEO Bill Klesse noted during the earnings call that the retail spinoff is the company's No. 1 priority right now. "We believe the separated retail business will perform well and unlock value for our shareholders," he said. "In addition to its large and geographically diverse network of high-quality sites, the retail business has a long history of strong brand recognition and financial performance, as well as significant growth opportunities in merchandise, foodservice and new-build locations."
Valero's 2012 fiscal year was the second best year in its history. As company executives reported today, Valero earned $348 million for the year, including $240 million in its U.S. retail division. In the fourth quarter, which ended Dec. 31, Valero's retail division achieved a net profit of $95 million, compared to a profit of $83 million during the same quarter in 2011. U.S. retail profits were especially strong, as Valero earned $78 million vs. $48 million a year earlier.
Merchandise sales at U.S. Valero retail sites increased to $303 million in the fourth quarter, compared to $293 million in its Q4 2011. However, merchandise margins remained the same at 29 percent.
Fuel margins per gallon at U.S. Valero retail sites increased to 20.8 cents per gallon vs. 13.9 cents during the same quarter a year ago.
Overall, Valero earned $1 billion companywide in the fourth quarter, marking its largest quarterly net profit since 2005. By comparison, the company achieved a profit of $45 million during its 2011 fourth quarter. Klesse cited strong refining margins as the main reason why its quarterly earnings more than doubled.
Investors, content with Valero's earnings results, traded the company's shares higher by nearly 9 percent in trading this morning.