US oil refiner Tesoro to buy Western Refining for $6.4 bn
18 November 2016
US oil refiner Tesoro Corp yesterday struck a deal to buy Western Refining Inc for $6.4 billion, in order to add refineries, pipelines and retail stations in Texas, New Mexico and Minnesota.
Tesoro will acquire Western at an implied current price of $37.30 per Western share in a stock transaction, representing an equity value of $4.1 billion based on Tesoro's closing stock price of $85.74 on 16 November.
The deal represents an enterprise value of $6.4 billion, including the assumption of approximately $1.7 billion of Western's net debt and the $605 million market value of non-controlling interest in Western Refining Logistics, LP.
Under the terms of the agreement, Western shareholders can opt to receive 0.4350 shares of Tesoro for each share of Western stock they own, or $37.30 in cash per share of Western stock.
The purchase price represents a premium of 22.3 per cent to the closing price of Western's stock on the day prior to announcement.
The merger will create $350 million to $425 million in synergies, which are expected to be realized within the first two years, the companies said in a statement.
Western Refining, owned by El Paso-based billionaire Paul Foster, is an independent refining and marketing company based in El Paso, Texas.
The company operates refineries in El Paso, Gallup, New Mexico and St. Paul Park, Minnesota. Its retail operations includes retail service stations and convenience stores in Arizona, Colorado, Minnesota, New Mexico, Texas, and Wisconsin, operating primarily through the Giant, Howdy's, and SuperAmerica brands.
Western Refining also owns approximately 53 per cent of the limited partnership interest of Western Refining Logistics, LP.
The combined company will have over 3,000 branded retail stations operating under brands including ARCO, Shell, Exxon, Mobil, SuperAmerica, Giant and Tesoro.
The merged company will also have 10 refineries, a refining capacity of over 1.1 million barrels per day.
"The acquisition of Western further strengthens our integrated business model and extends our portfolio into attractive and growing markets," said Greg Goff, chairman and CEO of Tesoro.
"As a leading integrated refining, marketing and logistics company, this transformative acquisition drives value through a combination of access to advantaged crude oil, a strong, multi-brand marketing and convenience store portfolio and a robust platform for logistics growth, all of which will allow us to continue to create shareholder value,'' he added.
"Joining forces with Tesoro, a company that shares our integrated business model strategy, will enable us to further leverage our capabilities in refining, marketing and logistics operations and allow our talented team to work on a growing number of exciting opportunities," said Paul Foster, executive chairman of Western Refining.