US refiner Valero to acquire Premcor in $8bn transaction

25 April 2005 16:09  [Source: ICIS news]

HOUSTON (CNI)--US refiner Valero said Monday it will acquire Premcor in an $8bn (Euro6.2bn) transaction, making Valero the largest refiner in North America.

 

Valero said it will add four refineries and 790,000 bbl/day of throughput capacity to its system. Valero will add refineries in Port Arthur, Texas; Memphis, Tennessee; Delaware City, Delaware; and Lima, Ohio to its system.

 

Valero will have 19 refineries with a throughput capacity of 3.3m bbl/day.

 

Said Valero chairman and chief executive Bill Greehey: “With this acquisition, we will have the most conversion capacity of any US refiner at around 2m bbl/day.”

 

Valero said it will have assets of $25bn and $70bn/year in revenues.

 

Valero said it will buy Premcor for $6.9bn. Premcor shareholders will receive 46.7m shares of Valero stock valued at $3.5bn. The cash portion of the transaction - $3.4bn - will be financed with a combination of cash on hand and bank debt.

 

In addition, San Antonio, Texas-based Valero said it will assume an estimated $1.8bn of Premcor’s existing long-term debt, offset by $800m in cash as of 31 December, 2004.

 

Said Valero chairman and chief executive Bill Greehey: “We estimate that we’ll benefit from $350m in annual synergies in the second year after closing.”

 

Greehey said Valero expects the acquisition of Old Greenwich, Connecticut-based Premcor to add 14% to its earnings per share and 13% to cash flow in the first year.

 

Premcor chief executive Jeffersen Allen: “This transaction provides Premcor’s shareholders with a meaningful increase in the value of their investment, as the terms of the agreement represent a 24.6% increase over the closing price of our stock on 22 April, 2005.”

 

Valero has 20,000 employees and an annual revenue of $55bn. Premcor is one of the largest independent petroleum refiners and suppliers of unbranded transportation fuels, heating oil, petrochemical feedstocks, petroleum coke and other petroleum products in the US. 


By: Brian Ford
+1 713 525 2653



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