(Reuters) - Oil and gas company Hess Corp (HES.N) filed with regulators on Wednesday to spin off its gas station and convenience store network, the latest business the company is shedding in response to a campaign by activist investor Elliott Management.
The company said that it will simultaneously run a process to possibly sell the retail business as it prepares for a spinoff.
Analysts said the business could be worth more than $1.5 billion.
Hess, which has broken up its huge energy business over the last year to focus more on U.S. exploration and production, said in March it would exit the retail gasoline business by 2015.
Hess Retail is the largest operator of gas-convenience stores along the U.S. East Coast, the company said in a filing with the Securities and Exchange Commission. (r.reuters.com/hag85v)
It operates more than 1,200 gas stations and convenience stores.
“The spinoff has several advantages,” said Fadel Gheit, an analyst with Oppenheimer & Co. “Obviously, there are tax advantages. Also, it will keep the brand name, which is worth a lot, because the brand name is well known on the East Coast of the U.S.”
Gheit said he believes that a spinoff, rather than a sale, would be preferable for shareholders, because there is possibility for strong growth at a stand-alone retail company.
Hess has received a ruling from the Internal Revenue Service that would allow it to distribute its retail business to shareholders in a tax-free spinoff.
fter Elliott began making its case for change in January, Hess announced plans to become a pure-play exploration and production company by selling or exiting a number of businesses, put eight new independent directors on the company’s board and stripped longtime Chief Executive John Hess of his role as chairman.
The company has already exited refining, sold its terminal business and divested some overseas oil and gas assets. The company said in December that completed and announced asset sales had generated about $7.8 billion of after-tax proceeds in 2013.
Hess shares rose 4 cents to $80.90 in morning trading on the New York Stock Exchange on Wednesday.
Reporting by Swetha Gopinath in Bangalore and Michael Erman in New York; Editing by Don Sebastian, Saumyadeb Chakrabarty and Jonathan Oatis