Delek US Holdings has signed a definitive agreement to acquire all outstanding shares of Alon USA Energy.
The combination is expected to create a strong entity with improved access to the Permian Basin.
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After the merger, the company will own a vast portfolio comprising refining, logistics, retail and wholesale marketing.
The combined refining system will have a capacity of nearly 300,000 barrels per day of crude throughput that includes four locations with an integrated retail platform.
Delek US chairman, president and CEO Uzi Yemin said: “We are excited to reach this agreement and believe this strategic combination 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.
“We expect to be able to achieve meaningful synergies across the organisation and the combination will create a refining system that will be one of the largest buyers of crude from the Permian Basin among the independent refiners.
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By GlobalData“Additionally, we expect the combined company will have the ability to unlock logistics value from Alon’s assets through future potential drop downs to Delek Logistics Partners and create a platform for future logistics projects to support a larger refining system.”
This all-stock transaction carries $464m in equity value based on the implied price for Alon common stock of $12.13 per share.
However, the enterprise value of this transaction, in which Delek US purchases remaining 53% percent of Alon shares, is nearly $675m. It includes the proportionate assumption of $152m net debt for this transaction and $59m of market value of the non-controlling interest in Alon USA Partners.
Under the agreement, the shareholders of these outstanding shares in Alon will receive 0.5 Delek US shares for each share of Alon.
After the completion of the merger, the company would be led by the management of Delek US, while the Special Committee of Alon’s board of directors will nominate one new director who will join the Delek US board.
The Special Committee will also nominate another director who will join the board of Delek Logistics Partners.
Diversified downstream energy company Delek US Holdings owns several assets in petroleum refining and logistics. It operates multiple refineries located in Tyler, Texas, and El Dorado, which process nearly 155,000 barrels per day.
