TheWriter
04-25-2005, 08:12 PM
Valero agrees to buy Premcor for $6.9B
James Aldridge
Valero Energy Corp. said Monday it will acquire Premcor Inc. in an $6.9 billion transaction, making Valero the largest refiner in North America.
San Antonio-based Valero (NYSE: VLO) will add four refineries with a combined throughput capacity of 790,000 barrels per day.
Once the purchase is complete, Valero will own 19 refineries in the United States, Canada and the Caribbean and have annual revenues of $70 billion. It will also have the ability to process 3.3 million barrels of oil per day.
Premcor's four refineries are located in Port Arthur, Texas; Memphis; Delaware City, Del.; and Lima, Ohio.
The boards of directors of Valero and Old Greenwich, Conn.-based Premcor (NYSE: PCO) unanimously approved the purchase, which is subject to a vote of Premcor's shareholders and regulatory approvals. The purchase is expected to close on Dec. 31, 2005.
Before this purchase, Valero had been the largest independent refiner in the United States. Its merger with Premcor solidifies its position as the largest refiner on the continent.
"This transaction is one of the largest and most strategic acquisitions in Valero's history," Valero Chairman and Chief Executive Officer Bill Greehey says. "We are acquiring several very strategic refineries for significantly less than their combined replacement value, and we'll be improving the profitability of these plants by capturing synergies, improving their reliability and yields, and increasing their capacities."
Oil corporations define replacement value by measuring the cost of acquiring a refinery versus what it would cost building that refinery from the ground up. In other words, Valero is able to purchase the refineries at a significant discount.
Greehey anticipates the merger will result in $350 million in annual savings in the second year after closing.
Under the terms of the agreement, Valero will pay $6.9 billion for Premcor -- 50 percent in cash and 50 percent in stock. Premcor shareholders would receive 46.7 million shares of Valero stock, currently valued at $3.5 billion. Valero will also assume $1.8 billion in Premcor's long-term debt.
Premcor Chairman Thomas D. O'Malley says this merger with Valero will create a refiner with the financial strength to expand refining capacity, supply more clean-burning fuels to the American market and improve operations from an environmental and safety standpoint.
"Valero has proven over the past 10 years to be an extremely efficient operator and has demonstrated a unique ability to grow both externally and internally," O'Malley says.
Valero is an oil refining and marketing company. Its 15 refineries have a combined throughput capacity of 2.5 million barrels per day -- which represents 12 percent of the United States' total capacity.
The company is also one of the largest retail operators with more than 4,700 stores under the Diamond Shamrock, Shamrock, Ultramar, Valero and Beacon brands.
http://www.bizjournals.com/sanantonio/stories/2005/04/25/daily1.html?jst=b_ln_hl
James Aldridge
Valero Energy Corp. said Monday it will acquire Premcor Inc. in an $6.9 billion transaction, making Valero the largest refiner in North America.
San Antonio-based Valero (NYSE: VLO) will add four refineries with a combined throughput capacity of 790,000 barrels per day.
Once the purchase is complete, Valero will own 19 refineries in the United States, Canada and the Caribbean and have annual revenues of $70 billion. It will also have the ability to process 3.3 million barrels of oil per day.
Premcor's four refineries are located in Port Arthur, Texas; Memphis; Delaware City, Del.; and Lima, Ohio.
The boards of directors of Valero and Old Greenwich, Conn.-based Premcor (NYSE: PCO) unanimously approved the purchase, which is subject to a vote of Premcor's shareholders and regulatory approvals. The purchase is expected to close on Dec. 31, 2005.
Before this purchase, Valero had been the largest independent refiner in the United States. Its merger with Premcor solidifies its position as the largest refiner on the continent.
"This transaction is one of the largest and most strategic acquisitions in Valero's history," Valero Chairman and Chief Executive Officer Bill Greehey says. "We are acquiring several very strategic refineries for significantly less than their combined replacement value, and we'll be improving the profitability of these plants by capturing synergies, improving their reliability and yields, and increasing their capacities."
Oil corporations define replacement value by measuring the cost of acquiring a refinery versus what it would cost building that refinery from the ground up. In other words, Valero is able to purchase the refineries at a significant discount.
Greehey anticipates the merger will result in $350 million in annual savings in the second year after closing.
Under the terms of the agreement, Valero will pay $6.9 billion for Premcor -- 50 percent in cash and 50 percent in stock. Premcor shareholders would receive 46.7 million shares of Valero stock, currently valued at $3.5 billion. Valero will also assume $1.8 billion in Premcor's long-term debt.
Premcor Chairman Thomas D. O'Malley says this merger with Valero will create a refiner with the financial strength to expand refining capacity, supply more clean-burning fuels to the American market and improve operations from an environmental and safety standpoint.
"Valero has proven over the past 10 years to be an extremely efficient operator and has demonstrated a unique ability to grow both externally and internally," O'Malley says.
Valero is an oil refining and marketing company. Its 15 refineries have a combined throughput capacity of 2.5 million barrels per day -- which represents 12 percent of the United States' total capacity.
The company is also one of the largest retail operators with more than 4,700 stores under the Diamond Shamrock, Shamrock, Ultramar, Valero and Beacon brands.
http://www.bizjournals.com/sanantonio/stories/2005/04/25/daily1.html?jst=b_ln_hl