Oil and gas company Hess Corporation’s (HES - Free Report) wholly owned subsidiary Hess Retail Corporation has filed paperwork with the U.S. Securities and Exchange Commission (SEC) for a potential spin-off of its retail unit.
The spin-off of Hess’ gasoline stations and convenience store network is in response to a campaign by activist investor Elliott Management and comes almost a year after Hess planned to exit the energy trading and marketing businesses.
Per the analysts, the retail business is estimated at over $1.5 billion. Hess intends to exit the retail gasoline business by 2015. Last year, Hess broke up its huge energy business to focus more on U.S. exploration and production.
According to the company’s filing with the SEC, Hess Retail, which runs over 1,200 gas stations and convenience stores, is the largest operator of gas convenience stores along the U.S. East Coast.
The spin-off is expected to have several benefits, tax advantage being one of them. Moreover, shareholders would benefit more from a spin-off rather than a sale as the standalone retail company would be well poised for growth.
Additionally, Hess has received a ruling from the Internal Revenue Service that would facilitate it to distribute its retail business to shareholders in a tax-free spin-off. Per the latest SEC filing, Hess shareholders would receive one share in the spun-off retail company for each Hess share held.
Hess has already divested its refining, terminal business and some overseas oil and gas assets. In 2013, the company raised about $7.8 billion of after-tax proceeds from these sales.
HES carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the oil and gas sector include Harvest Natural Resources Inc. , Stone Energy Corp. (SGY - Free Report) and Helmerich & Payne, Inc. (HP - Free Report) . All these stocks hold a Zacks Rank #1 (Strong Buy).