Securities Law & Instruments

Headnote

National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- Application for relief from prospectus requirements for spin-off by a U.S. publicly traded company to investors issuing shares of spun off entity -- Distribution not covered by legislative exemptions -- there is no market for the securities of the issuer in Canada -- the number of Canadian participants and their share ownership are de minimis -- relief granted, subject to conditions.

Applicable Legislative Provisions

Securities Act,R.S.O. 1990, c. S.5, as am., ss. 53, 74.

National Instrument 45-106 Prospectus and Registration Exemptions.

National Instrument 45-102 Resale of Securities.

March 13, 2013


TRANSLATION
IN THE MATTER OF
THE SECURITIES LEGISLATION OF
QUÉBEC AND ONTARIO
(the "Jurisdictions")
AND
IN THE MATTER OF
THE PROCESS FOR EXEMPTIVE RELIEF
APPLICATIONS IN MULTIPLE JURISDICTIONS
AND
IN THE MATTER
VALERO ENERGY CORPORATION
(the "Filer")
DECISION


Background

The securities regulatory authority or regulator in each of the Jurisdictions (the "Decision Maker") has received an application from the Filer for a decision under the securities legislation of the Jurisdictions (the "Legislation") for an exemption (the "Exemption Sought") from the prospectus requirements in connection with the distribution (the "Spin-Off") by the Filer of shares of common stock of CST Brands, Inc. ("CST"), a direct wholly-owned subsidiary of the Filer, by way of a dividend in specie, to the Filer's holders of shares of common stock resident in Canada (the "Filer Canadian Shareholders").

Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a dual application):

(a) the Autorité des marchés financiers is the principal regulator for this application;

(b) the Filer has provided notice that Section 4.7(1) of Regulation 11-102 Respecting Passport System ("Regulation 11-102") is intended to be relied upon in each of jurisdiction of Canada; and

(c) the decision is the decision of the principal regulator and evidences the decision of the securities regulatory authority or regulator in Ontario.

Interpretation

Terms defined in Regulation 14-101 Respecting Definitions and Regulation 11-102 have the same meaning if used in this decision, unless otherwise defined.

Representations

This decision is based on the following facts represented by the Filer:

1. The Filer is a company incorporated in Delaware. The Filer's head office is located at One Valero Way, San Antonio, Texas, United States.

2. The Filer is a reporting issuer under the securities legislation of the provinces of British Columbia, Alberta, Saskatchewan, Ontario, Québec and Nova Scotia.

3. The authorized capital stock of the Filer consists of 1,200,000,000 shares of common stock ("Filer Common Shares") and 20,000,000 shares of preferred stock. As of January 31, 2013, 673,501,593 Filer Common Shares were issued and 552,933,285 Filer Common Shares were outstanding. No shares of Filer preferred stock were issued and outstanding as of January 31, 2013.

4. Filer Common Shares are listed on the New York Stock Exchange (the "NYSE") and trade under the symbol "VLO". Filer Common Shares are not listed on any Canadian exchange and the Filer has no intention of listing its securities on any Canadian exchange.

5. The Filer is currently subject to the 1934 Act and the rules, regulations and orders promulgated thereunder.

6. Based on information obtained by the Filer, there were 178 registered Filer Canadian Shareholders on or about January 17, 2013, holding approximately 185,115 Filer Common Shares as of such date. Among these registered Filer Canadian Shareholders, there were 40 non-employee registered Filer Canadian Shareholders holding 21,112 Filer Common Shares. The Filer does not expect these numbers to have materially changed since that date.

7. Based on information obtained by the Filer, there were 7,608 beneficial Filer Canadian Shareholders on or about January 30, 2013, holding approximately 10,848,700 Filer Common Shares as of such date.

8. After reasonable inquiry, the Filer has determined that Filer Canadian Shareholders of record and beneficially, collectively, (i) held approximately 2.0% of the outstanding Filer Common Shares on or about January 30, 2013, and (ii) represented approximately 2.76% of all holders of Filer Common Shares worldwide on or about January 30, 2013.

9. CST is currently a direct wholly-owned subsidiary of the Filer incorporated in Delaware in November 2012.

10. CST's head office is located at One Valero Way, San Antonio, Texas, United States.

11. As of January 30, 2013, all of the issued and outstanding shares of common stock of CST ("CST Common Shares") were held by the Filer. No other stock of CST was issued and outstanding as of January 30, 2013.

12. Neither the Filer nor CST is in default of any of its obligations under the securities legislation of any jurisdiction in Canada.

13. The purpose of the Spin-Off is to spin-out the Filer's retail business into an independent public company.

14. The Spin-Off will be effected by the following principal steps:

(i) the Filer will distribute 80% of the outstanding CST Common Shares to holders of Filer Common Shares at a rate of CST Common Shares for Filer Common Shares held to be determined by the board of directors of the Filer prior to the record date for the Spin-Off;

(ii) Fractional CST Common Shares will not be issued to Filer Shareholders in connection with the Spin-Off. All fractional CST Common Shares will be aggregated into whole shares and sold in the public market by the transfer agent; holders of Filer Common Shares who would otherwise be entitled to receive a fractional CST Common Share will receive their pro rata share of the proceeds of such sale in lieu thereof; and

(iii) the holders of Filer Common Shares will not be required to pay any consideration for the CST Common Shares received in the Spin-Off. The Spin-Off will occur without any investment decision on the part of the Filer Shareholders.

15. Following completion of the Spin-Off, CST will cease to be a subsidiary of the Filer and the Filer will retain 20% of the outstanding CST Common Shares.

16. It is expected that CST Common Shares will be listed for trading on the NYSE under the symbol "CST". CST has no intention of listing its securities on any Canadian exchange.

17. CST has no intention of becoming a reporting issuer under the legislation of any jurisdiction in Canada after completion of the Spin-Off.

18. The Spin-Off will be in accordance with Delaware state law.

19. Because the Spin-Off will be effected by way of a dividend to the holders of Filer Common Shares, no stockholder approval of the proposed transaction is required or being sought under Delaware state law or any applicable U.S. federal securities laws.

20. On November 16, 2012, CST filed a registration statement on Form 10 with the SEC detailing the planned Spin-Off, and subsequently filed amendments to the registration statement on January 9, 2013, February 8, 2013 and March 1, 2013 (the registration statement, as so amended, is referred to as the "Registration Statement").

21. After the SEC has completed its review of the Registration Statement, Filer Shareholders will receive a copy of an information statement (the "Information Statement") forming part of the Registration Statement. All materials relating to the Spin-Off and the dividend sent by or on behalf of the Filer and CST in the United States (including the Information Statement) will be sent concurrently to Filer Canadian Shareholders.

22. The Information Statement will contain prospectus-level disclosure about CST.

23. Following completion of the Spin-Off, CST will send the continuous disclosure materials that it sends to holders of CST Common Shares resident in the United States concurrently to the holders of CST Common Shares resident in Canada.

24. Filer Canadian Shareholders who receive CST Common Shares pursuant to the Spin-Off will have the same rights and remedies available to holders of Filer Common Shares resident in the United States under the laws of the United States in respect of the disclosure documentation received in connection with the Spin-Off.

25. There will be no active trading market for the CST Common Shares in Canada following the Spin-Off and none is expected to develop. Consequently, it is expected that any resale of CST Common Shares distributed in the Spin-Off will occur through the facilities of the NYSE.

26. The distribution of CST Common Shares to Filer Canadian Shareholders would be exempt from the Prospectus Requirements pursuant to subsection 2.31(2) of Regulation 45-106 Respecting Prospectus and Registration Exemptions but for the fact that CST is not a reporting issuer under the securities legislation of any jurisdiction in Canada.

Decision

Each of the Decision Makers is satisfied that the decision meets the test set out in the Legislation for the Decision Maker to make the decision.

The decision of the Decision Makers under the Legislation is that the Exemption Sought is granted, provided that the first trade in CST Common Shares issued in connection with the Spin-Off is deemed to be a distribution unless the conditions in section 2.6 or subsection 2.14(1) of Regulation 45-102 Respecting Resale of Securities are satisfied.

"Gilles Leclerc"
Senior Director, Corporate Finance
Autorité des marchés financiers