| NEW YORK, Sept 27
NEW YORK, Sept 27 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
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 (EBITDA) 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.
The people asked not to be named because the sale process is
TPG and Carlyle declined to comment, while Credit Suisse,
Couche-Tard and 7-Eleven did not immediately respond to requests
"We have said we are looking for a tax-efficient method to
unlock the value that is in our retail business," Valero
spokesman Bill Day said on Thursday, declining to comment on the
The auction is at a very early stage and it remains unclear
if the U.S. and Canadian operations would be sold as a whole or
separately, the people said.
The retail split would allow Valero to focus on its core
refining business. It could also generate additional shareholder
value since retail businesses similar to Valero's trade at
higher valuations than refining companies.
Retail units are typically viewed as an outlet for fuels
produced at a company's refineries. Such stores allow refiners
to keep utilization rates up even when demand slows, a situation
that puts them at an advantage to competitors without stores.