CST Brands Becoming Retail Reality

Valero's board approves spinoff of stations, stores; IRS signs off on tax issue

Published in CSP Daily News

SAN ANTONIO -- CST Brands Inc.--Valero Energy Corp.'s planned retail business entity--has cleared the final hurdles in becoming a reality as Valero's board of directors has approved the spinoff and it has received a "private-letter ruling" from the Internal Revenue Service (IRS) that would confirm that shares in CST Brands can be treated as a tax-free distribution to shareholders.

As reported in a Raymond James/CSP Daily News Flash on Friday, the board on April 4 approved the spinoff through the distribution of 80% of the outstanding shares of CST Brands common stock to holders of Valero common stock. The company said it expects the distribution of CST Brands shares to occur on May 1, 2013.

The completion of the distribution is subject to the U.S. Securities & Exchange Commission (SEC) declaring effective CST Brands' registration statement. The completion of the distribution is also subject to the conditions set forth in the Separation & Distribution Agreement to be executed by Valero and CST Brands.

Valero said that it has received a private-letter ruling from the IRS to the effect that, based on certain facts, assumptions, representations and undertakings set forth in the ruling, for U.S. federal income tax purposes, the distribution of CST Brands common stock and certain related transactions generally will not be taxable to Valero or U.S. holders of Valero common stock, except with respect to any cash received in lieu of fractional shares.

Following the distribution of CST Brands common stock, CST Brands will be an independent, publicly traded company, and Valero will own 20% of the common stock of CST Brands. Valero expects to retain its 20% equity interest in CST Brands for six months after the distribution, and thereafter, to divest its interest as market conditions warrant.

CST Brands common stock will trade on the New York Stock Exchange under the ticker symbol "CST." Valero common stock will continue to trade on the New York Stock Exchange under the ticker symbol "VLO."

CST Brands, to be based in San Antonio like Valero, is expected to be one of the largest independent retailers of motor fuels and convenience merchandise in the United States and eastern Canada with nearly 1,900 sites and nearly 12,000 employees.

Currently, Valero is a manufacturer and marketer of transportation fuels, other petrochemical products and power. Its assets include 16 petroleum refineries with a combined throughput capacity of approximately three million barrels per day, 10 ethanol plants and a 50-megawatt wind farm. Approximately 6,800 retail and branded wholesale outlets carry the Valero, Diamond Shamrock, Shamrock and Beacon brands in the United States and the Caribbean; Ultramar in Canada; and Texaco in the United Kingdom and Ireland.

Keywords: 
financial