SAN ANTONIO -- When Valero Energy Corp. spins off its retail stores May 1, the new company, CST Brands Inc., instantly will be San Antonio's third-largest publicly traded firm by revenue (behind Valero and Tesoro), reported The San Antonio Express-News.
CST will take over approximately 1,900 retail sites in the United States and Canada, and operate most of the stores under the existing Corner Store name. It will be one of North America's largest independent retailers of transportation fuels and convenience merchandise.
"We have been a very small piece of the Valero revenue pie--10%--but on our own we're a really big company," Kim Bowers, formerly Valero's general counsel and now chairman, president and CEO of CST, told the newspaper.
Bowers has plans for CST to get even bigger, said the report. The company has said it will build 15 new U.S. locations this year, mostly in Texas, and eight in Canada. The company's largest store opens next month in Three Rivers in the heart of the Eagle Ford Shale. CST also will look to acquire smaller chains.
"It's a market that's structured for the big chains to be the survivors," Bowers said.
CST faces a range of competitors, including 7-Eleven, Alimentation Couche-Tard, Casey's General Stores, Susser's Stripes stores and a range of smaller competitors, the report said.
The business has been "about moving fuel through our pumps," Bowers said. "Our food offering is strong, but it has sort of been a side note." Fuel will remain "very important, but it's no longer the first priority."
Going forward, the key to boosting the bottom line for CST will be a bigger focus on food. "The more we can do with foodservice the more profitability we bring to a store," she told the paper. "The more we can grow our new stores and build new stores, the more we can grow our food program."
Approximately 60% of CST's customers come to buy food or merchandise only, she said.
CST's Fresh Choices, its private-label brand, is "a differentiator for us," she said. The private-label items "help build customer loyalty."
She added, "Our breakfast offering is robust. We tend to do really well with the morning crowd. We're working now to try to extend our offerings to the afternoon crowd."
As CST grows, it will continue to have a relationship with Valero, the report said. But with the separation, CST has the chance to offer other fuel brands, too, according to the Express-News. Should the company plan 10 new stores in Houston, for example, it will be able to approach Valero, or Exxon Mobil Corp. "or anybody else," Bowers said, "and ask what they can give us for a supply price. I think we'll have more flexibility because of that."
Click here to read the full Express-News report.
Meanwhile, CST Brands has announced the commencement, in connection with its spinoff from Valero, of an offering of CST Brands' $550 million aggregate principal amount of senior notes due 2023, subject to market conditions.
It expects the notes to be issued initially to Valero and subsequently exchanged by Valero for outstanding indebtedness of Valero held by a third party. Following such exchange, the notes will be sold by such third party and other initial purchasers in the offering. The notes will initially be guaranteed on a senior unsecured basis by each of the domestic subsidiaries of CST Brands that guarantee indebtedness under its senior secured revolving credit and term loan facilities.
CST operates 1,032 Corner Stores throughout the United States including Texas, Louisiana, Arkansas, Oklahoma, New Mexico, Colorado, Wyoming, Arizona and California. In Canada, it operates 768 service stations that sell Ultramar fuel in Quebec, Ontario and throughout the Atlantic region.
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