Delek US Holdings Inc., Brentwood, Tenn., has entered a definitive agreement to buy all outstanding shares of Alon Israel Oil Co. Ltd.’s US-based refining and marketing subsidiary Alon USA Energy Inc., Dallas, which owns and operates a 74,000-b/sd refinery in Krotz Springs, La.; an idled 70,000-b/sd, three-refinery complex in California; and through its majority interest in Alon USA Partners LP, a 73,000 b/sd refinery at Big Spring, Tex. (OGJ Online, Nov. 12, 2014).
As part of the all-stock transaction, Delek will acquire the remaining 53% of Alon USA’s common stock not already owned by Delek at a fixed exchange ratio of 0.5040 of a share of Delek common stock for each outstanding Alon share, the companies said in a joint release.
The merger agreement puts a value of $12.13/share on Alon USA stock based on the Dec. 30, 2016, closing price of $24.07/share for Delek US stock for an equity value of $464 million for remaining Alon USA shares and an enterprise value of $675 million, which includes Delek’s proportionate assumption of $152 million of net debt related to the proposed merger as well as $59 million of market value for noncontrolling interest in Alon USA Partners, the companies said.
The transaction, which has been approved by both companies’ boards, is scheduled to close during this year’s first half, pending approval by shareholders as well as other customary closing conditions and regulatory approvals, Delek and Alon USA said.
“[Once completed, the merger] will result in a larger, more diverse company that is well positioned to take advantage of opportunities in the market and better navigate the cyclical nature of our business,” said Uzi Yemin, president and chief executive of Delek US.
Alongside creating one of the largest US independent buyers of Permian basin crude, Yemin said the parties expect the merger will enable the combined company to unlock logistics value from Alon’s assets through future potential drop downs to Delek Logistics Partners LP, as well as create a platform for future logistics projects to support a larger refining system.
Announcement of the proposed merger follows Delek’s buyout offer to Alon USA in late 2016 as part of a plan to support the companies’ shared mission to optimize and grow stable cash flows from an integrated portfolio of refining, logistics, and retail assets to become a peer-leading enterprise in the refinery space for the long-term (OGJ Online, Oct. 21, 2016).
Delek previously purchased about 47% of Alon’s outstanding shares in 2015 (OGJ Online, Apr. 15, 2015).
Merger details
Upon closing, the combined company will be led primarily by Delek US’ management team and will remain headquartered in Brentwood, said Delek, adding that it will determine what the company’s presence in Dallas will be during the integration process.
In addition to Alon USA’s Krotz Springs and Big Spring refineries, Delek US’s new refining system will include its own 75,000-b/sd refinery in Tyler, Tex., and 80,000-b/sd refinery in El Dorado, Ark., that, together, would have combined access to about 207,000-b/d of Permian basin crude to satisfy 69% of feedstock requirements for the new system’s more than 300,000-b/sd overall crude throughput capacity, according to the companies.
Alongside expanded retail, renewables, and asphalt operations, the merger will result in expanded access for the combined refining system to enable expanded distribution and marketing of finished products, including 600,000 bbl/month of space on Colonial pipeline as well as a monthly allocation of 600,000-1 million bbl along TEPPCO pipeline.
Contact Robert Brelsford at [email protected].
