Valero may raise $3.5 billion through retail arm auction: sources

NEW YORK, Thu Sep 27, 2012 – Valero Energy Corp. is selling its retail business, which operates gas stations and convenience stores, through an auction that could fetch more than $3.5 billion and has lured the interest of private equity firms and convenience-store operators, people familiar with the matter said.

Valero’s retail business, which consists of nearly 1,000 U.S. stores and some 775 units in Canada, has around $450 million in annual earnings before interest, tax, depreciation and amortization and could sell for around 8 times EBITDA, or about $3.5 billion, two of the people said.

The U.S. refining company had said in July it would split off its gas station and convenience stores, and cited a tax-free spinoff to shareholders as one of the options.

Valero, which is being advised by Credit Suisse Group on the retail split, has sent financial information about the unit to interested parties and is expected to receive initial offers in October, those familiar with the matter said.

Several big private equity firms, including TPG Capital LP and Carlyle Group LP, are among the parties that are taking an initial look, one of the people said.

Large convenient store chains such as Alimentation Couche-Tard Inc. or 7-Eleven would also likely have some interest, two other people said.