While releasing its Q2 earnings, Valero Energy (VLO) also dropped news of its plans to separate retail unit. While Valero is best known for its refining business, the company also operates over 6,000 retail and branded wholesale outlets. According to CapIQ, for the FYE 2011 the retail segment generated $11.7b of revenues and $381m of EBIT, small potatoes compared to the refining side of the business. The segment had a nice Q2 as well, reporting $172m of operating income due to “higher fuel margins and volumes in US retail”.
According to CEO Bill Klesse, “we believe a separation of our retail business from the remainder of Valero by way of a tax-efficient distribution will create operational flexibility within the businesses and unlock value for our shareholders…as independent companies, both retail and the remaining business will be better-positioned to focus on their industry-specific strategies.” The energy sector has been a big player in the spinoff world over the past few years and this is often the rationale cited for such moves. The methodology behind the split has not been determined yet though, but the company is being advised of its options by Credit Suisse.
These types of moves often ignite trends and we previously reported that Murphy Oil (MUR) was also looking into separating its retail unit. Not everyone is a trend follower though as Gary Heminger, CEO of Marathon Petroleum (MPC), told analysts that the company is not only retaining its retail unit, it is also looking to expand it even further via acquisitions.
We are obviously rooting for a spinoff here, but we will keep you updated as more information is released.
Disclosure: Author holds no position in any stock mentioned.