SCS IPO to Proceed
Alon USA ready to file paperwork to spin off its c-store division
ODESSA, Texas -- Alon USA intends to file its paperwork this month with the Securities & Exchange Commission (SEC) to begin the process of spinning off its convenience store arm, Southwest Convenience Stores (SCS), as a separate public entity. "We will be filing our S1 for the Alon brand's IPO in November such that we will be prepared to move forward quickly when the opportunity arises," company president and CEO Jeff Morris said Thursday during a conference call.
The move is expected to provide Odessa, Texas-based SCS with a fresh flush of cash. "We believe it is an [image-nocss] opportunity and it creates shareholder value," said Morris, who legally cannot say much about the IPO. Morris did, however, enumerate a couple of ways the spinoff could benefit the retail arm.
"One, we can compare how companies like Susser or Casey's or The Pantry or others are valued on a multiple basis vs. what refiners are valued. That is an apparent fact that is in the market," he said. "The other thing that we are keenly aware of is that in a company like ours, the retail division competes for capital with the refining division, and sometimes the retailers are very successful and sometimes they are not. We think it would be advantageous for this segment to have the opportunity to have access to other markets or raise capital on its own. And I believe that would help strengthen the business."
Morris added, "I will remind you that Alon Energy does intend to retain a majority ownership even in the IPO so it will still be an integrated portion of the business."
In previous conference calls with stock analysts, Morris stated, "We are proceeding with an initial public offering related to our retail and branded marketing businesses, which we will seek to complete by year end."
As of Dec. 31, 2007, Dallas-based Alon USA operated 307 owned and leased c-stores primarily in Central and West Texas and New Mexico. The company's stores operate primarily under the 7-Eleven and FINA brand names.
( Click here for Alon USA's third-quarter results release.)