· Transaction creates a
premier, highly integrated and geographically diversified refining,
marketing and logistics company
· Stock transaction at
exchange ratio of 0.4350, with option to elect cash in lieu of
stock up to a cap of 10% of the equity consideration; values the
transaction at $6.4 billion
· Commit to delivering
$350 to $425 million in annual synergies; run rate to be achieved
within the first two years
· Expects to achieve 10%
to 13% EPS accretion in 2018, the first full year of combined
operations
· Well positioned, highly
reliable and advantaged refining system with over 1.1 million
barrels per day of refining capacity with access to wide array of
advantaged crude oil
· Creates leading
multi-brand marketing and convenience store portfolio in growing
geographies with over 3,000 combined branded retail
stations
· Expands opportunities
for logistics growth in crude oil production basins and product
regions, particularly in the Permian basin
SAN ANTONIO AND EL PASO,
TEXAS - November 17,
2016 - Tesoro Corporation (NYSE: TSO) ("Tesoro") and Western
Refining, Inc. (NYSE: WNR) ("Western") today jointly announced a
definitive agreement under which 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 November 16, 2016. This
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 (NYSE: WNRL). This transaction has
been unanimously approved by the boards of directors of both
companies, and is another transformative step forward for Tesoro
and the Company's ongoing commitment to creating significant value
for shareholders, employees, communities and other key partners.
The acquisition creates a premier, highly integrated and
geographically diversified refining, marketing and logistics
company and provides a strong platform for earnings growth and cash
flow generation.
Under
the terms of the agreement, Western shareholders can elect 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. Elections
to receive cash will be subject to proration to the extent they
exceed approximately 10.8 million shares (or approximately $404
million in the aggregate). Stock elections will not be subject to
proration. The purchase price represents a premium of 22.3% to the
closing price of Western's stock on the day prior to announcement,
and a 31.6% premium to the volume weighted average price over the
last 30 trading days. The transaction is expected to be tax-free to
Western's shareholders who elect stock.
"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."
"Also,
our increased scale and diversity will enable us to leverage and
enhance in-house technical capabilities, which we expect will
result in cost efficiencies, the ability to drive more growth and
increased productivity," Goff continued.
"This
strategic combination provides our shareholders with the
opportunity to participate in the tremendous future growth
prospects and synergies of the combined company," said Paul Foster,
Executive Chairman of Western Refining. "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. We have
tremendous respect for the Tesoro team and are excited to be a part
of a larger and more diverse organization to support our continued
growth."
Strategic Rationale
This transaction will enhance the integrated refining, marketing
and logistics operations of both companies, creating a combined
company that is well-positioned to drive significant growth across
the value chain.
-
Top Tier Refining System:
Adds Western's refineries in Texas, New Mexico and Minnesota to
Tesoro's existing refineries in California, Washington, Alaska,
Utah and North Dakota, which will expand the combined company's
operational capabilities and improve access to advantaged crude oil
and extended product regions. Combined, the Company will have ten
refineries, a refining capacity of over 1.1 million barrels per day
and will benefit from Tesoro's and Western's proven track record of
operational excellence.
-
Strong, Combined Multi-brand
Marketing and Convenience Store Portfolio in Growing
Geographies: Brings together 12 premium and leading value
retail and convenience store brands to better serve a broad
customer base and regional preferences, and provides improved
ratable supply from the entire refining system. The combined retail
operations will comprise over 3,000 branded retail stations
operating under a variety of brands including ARCO®, Shell®,
Exxon®, Mobil®, SuperAmerica®, Giant and Tesoro®.
-
Expands Opportunities for
Logistics Growth: Leverages an extensive and complementary
logistics network with access to advantaged crude oil basins. The
logistics business will include ownership in two high-growth,
independent Master Limited Partnerships - Tesoro Logistics LP and
Western Refining Logistics, LP. Upon close of the transaction,
Tesoro will own the general partner and be the largest unitholder
in each MLP. Tesoro is committed to growing the value of the
combined logistics portfolio and the current logistics growth
strategy will be deployed across the expanded business. This
strategy consists of: generating stable fee-based revenues;
optimizing existing assets; pursuing high-return organic growth
opportunities; growing through strategic acquisitions; and growing
through the combined drop down inventory available to the two MLPs.
Additionally, Tesoro expects to use the parent company's strong
operating and execution capability to enhance the portfolio of
opportunities in the high-growth Permian and other attractive crude
oil basins. This will include investments in crude oil gathering
and storage, as well as natural gas gathering and
processing.
-
Significant Shareholder Value
Creation from Synergies: Shareholders of both companies will
benefit from $350 to $425 million in operational, commercial and
corporate synergies. The Company expects to achieve the full run
rate of these synergies within the first two years. The Company is
confident in its ability to achieve these synergies given its solid
track record of integrating operations and leveraging its
integrated business model to deliver earnings growth through
productivity, cost and system optimization benefits.
-
Strong Financial Position and
Significant Cash Flow Enable Investments for Future Growth,
Reducing Debt and Returning Cash to Shareholders: The combined
company is expected to deliver strong cash flows providing growth
in shareholder value through investments in high-return capital
projects, dividends and share repurchases. Upon closing, Tesoro
will continue to have a strong balance sheet and credit metrics,
and will remain on track for achieving an investment grade credit
rating. The Company has increased its share repurchase
authorization by $1.0 billion to over $2.0 billion in total. Tesoro
expects to maintain its current quarterly dividend of $0.55 per
share (or $2.20 per share annualized) after closing and is focused
on growing dividends commensurate with the growth of the
Company.
Leadership
Upon closing, Greg Goff will continue to serve as Chairman,
President and Chief Executive Officer of the combined company.
Steven Sterin will continue to serve as Executive Vice President
and Chief Financial Officer. Tesoro's Board of Directors is also
expected to expand the size of the Board and name Western's current
Executive Chairman, Paul Foster, and Western's current Chief
Executive Officer, Jeff Stevens, as directors after closing of the
transaction. The headquarters of Tesoro will remain in San
Antonio, TX.
Approvals and Timing
The transaction is expected to close in the first half of 2017 and
is subject to customary closing conditions, including approval by
the shareholders of both companies and the receipt of regulatory
approval.
Public Invitation to Conference Call and
Webcast
Tesoro and Western will live broadcast a conference call at 7:30
a.m. CT (8:30 a.m. ET) today to discuss the transaction. Tesoro
will also provide an update regarding its 2017 stand-alone outlook
on the conference call. Interested parties may listen to the
conference call and access accompanying presentation slides by
logging on to http://www.tsocorp.com or http://www.wnr.com.
Advisors
Goldman, Sachs & Co. is serving as exclusive financial advisor
to Tesoro and certain of its affiliates are providing committed
financing. Sullivan & Cromwell LLP is serving as Tesoro's legal
advisor for the transaction. Barclays is serving as exclusive
financial advisor to Western and Davis Polk & Wardwell LLP is
serving as its legal advisor.
About Tesoro Corporation
Tesoro Corporation, a Fortune 100 company, is an independent
refiner and marketer of petroleum products. Tesoro, through its
subsidiaries, operates seven refineries in the western United
States with a combined capacity of over 895,000 barrels per day and
ownership in a logistics business, which includes an interest in
Tesoro Logistics LP (NYSE: TLLP) and ownership of its general
partner. Tesoro's retail-marketing system includes over 2,400
retail stations under the ARCO®, Shell®, Exxon®, Mobil®, USA
Gasoline(TM), Rebel(TM) and Tesoro® brands.
About Western Refining, Inc.
Western Refining, Inc. is an independent refining and
marketing company headquartered in El Paso, Texas. The Company
operates refineries in El Paso, Gallup, New
Mexico and St. Paul Park, Minnesota. The Company's 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,
Inc. also owns the general partner and approximately 53% of
the limited partnership interest of Western Refining
Logistics, LP (NYSE: WNRL).
More
information about Western Refining is available at
http://www.wnr.com.
Forward Looking Statements
This communication contains certain statements
that are "forward-looking" statements within the meaning of Section
27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. Words such as "may," "will," "could,"
"anticipate," "estimate," "expect," "predict," "project," "future,"
"potential," "intend," "plan," "assume," "believe," "forecast,"
"look," "build," "focus," "create," "work" "continue" or the
negative of such terms or other variations thereof and words and
terms of similar substance used in connection with any discussion
of future plans, actions, or events identify forward-looking
statements. These forward-looking statements include, but are not
limited to, statements regarding the proposed merger, integration
and transition plans, synergies, opportunities, anticipated future
performance, expected share buyback program and expected dividends.
There are a number of risks and uncertainties that could cause
actual results to differ materially from the forward-looking
statements included in this communication. For example, the
expected timing and likelihood of completion of the proposed
merger, including the timing, receipt and terms and conditions of
any required governmental and regulatory approvals of the proposed
merger that could reduce anticipated benefits or cause the parties
to abandon the transaction, the ability to successfully integrate
the businesses, the occurrence of any event, change or other
circumstances that could give rise to the termination of the merger
agreement, the possibility that stockholders of Tesoro Corporation
("Tesoro") may not approve the issuance of new shares of common
stock in the merger or that stockholders of Western Refining, Inc.
("Western") may not approve the merger agreement, the risk that the
parties may not be able to satisfy the conditions to the proposed
transaction in a timely manner or at all, risks related to
disruption of management time from ongoing business operations due
to the proposed transaction, the risk that any announcements
relating to the proposed transaction could have adverse effects on
the market price of Tesoro's common stock or Western's common
stock, the risk that the proposed transaction and its announcement
could have an adverse effect on the ability of Tesoro and Western
to retain customers and retain and hire key personnel and maintain
relationships with their suppliers and customers and on their
operating results and businesses generally, the risk that problems
may arise in successfully integrating the businesses of the
companies, which may result in the combined company not operating
as effectively and efficiently as expected, the risk that the
combined company may be unable to achieve cost-cutting synergies or
it may take longer than expected to achieve those synergies, the
risk that the combined company may not buy back shares, the risk of
the amount of any future dividend Tesoro may pay, and other
factors. All such factors are difficult to predict and are beyond
our control, including those detailed in Tesoro's annual reports on
Form 10-K, quarterly reports on Form 10-Q and Current Reports on
Form 8-K that are available on Tesoro's website at
http://www.tsocorp.com and on the SEC website at
http://www.sec.gov, and those detailed in Western's annual reports
on Form 10-K, quarterly reports on Form 10-Q and Current Reports on
Form 8-K that are available on Western's website at
http://www.wnr.com and on the SEC website at http://www.sec.gov.
Western's forward-looking statements are based on assumptions that
Western believes to be reasonable but that may not prove to be
accurate. We undertake no obligation to publicly release the result
of any revisions to any such forward-looking statements that may be
made to reflect events or circumstances that occur, or which we
become aware of, except as required by applicable law or
regulation. Readers are cautioned not to place undue reliance on
these forward-looking statements that speak only as of the date
hereof.
No Offer or Solicitation
This communication relates to a proposed business
combination between Western and Tesoro. This announcement is for
informational purposes only and is neither an offer to purchase,
nor a solicitation of an offer to sell, any securities or the
solicitation of any vote in any jurisdiction pursuant to the
proposed transactions or otherwise, nor shall there be any sale,
issuance or transfer or securities in any jurisdiction in
contravention of applicable law. No offer of securities shall be
made except by means of a prospectus meeting the requirements of
Section 10 of the Securities Act of 1933, as amended.
Additional Information and Where to Find
It
This communication may be deemed to be
solicitation material in respect of the proposed transaction
between Tesoro and Western. In connection with the proposed
transaction, Western and/or Tesoro may file one or more proxy
statements, registration statements, proxy statement/prospectus or
other documents with the SEC. This communication is not a
substitute for the proxy statement, registration statement, proxy
statement/prospectus or any other documents that Tesoro or Western
may file with the SEC or send to stockholders in connection with
the proposed transaction. STOCKHOLDERS OF TESORO AND WESTERN ARE
URGED TO READ ALL RELEVANT DOCUMENTS FILED WITH THE SEC, INCLUDING
THE PROXY STATEMENT(S), REGISTRATION STATEMENT(S) AND/OR PROXY
STATEMENT/PROSPECTUS, BECAUSE THEY WILL CONTAIN IMPORTANT
INFORMATION ABOUT THE PROPOSED TRANSACTION.
Any definitive proxy statement(s) (if and when
available) will be mailed to stockholders of Western and/or Tesoro,
as applicable. Investors and security holders will be able to
obtain copies of these documents, including the proxy
statement/prospectus, and other documents filed with the SEC (when
available) free of charge at the SEC's website, http://www.sec.gov.
Copies of documents filed with the SEC by Tesoro will be made
available free of charge on Tesoro's website at
http://www.tsocorp.com or by contacting Tesoro's Investor Relations
Department by phone at 210-626-6000. Copies of documents filed with
the SEC by Western will be made available free of charge on
Western's website at http://www.wnr.com or by contacting Western's
Investor Relations Department by phone at 602-286-1530 or
602-286-1533.
Participants in the Solicitation
Tesoro and its directors and executive officers,
and Western and its directors and executive officers, may be deemed
to be participants in the solicitation of proxies from the holders
of Tesoro common stock and Western common stock in respect of the
proposed transaction. Information about the directors and executive
officers of Tesoro is set forth in the proxy statement for Tesoro's
2016 Annual Meeting of Stockholders, which was filed with the SEC
on March 22, 2016, and in the other documents filed after the date
thereof by Tesoro with the SEC. Information about the directors and
executive officers of Western is set forth in the proxy statement
for Western's 2016 Annual Meeting of Shareholders, which was filed
with the SEC on April 22, 2016, and in the other documents filed
after the date thereof by Western with the SEC. Investors may
obtain additional information regarding the interests of such
participants by reading the proxy statement/prospectus regarding
the proposed transaction when it becomes available. You may obtain
free copies of these documents as described in the preceding
paragraph.
Contacts:
For Tesoro:
Investors:
Sam Ramraj, Vice President, Investor Relations, (210) 626-4757
Media:
Tesoro Media Relations, media@tsocorp.com, (210) 626-7702
For
Western:
Investors:
Jeffrey S. Beyersdorfer
602-286-1530
Michelle Clemente
602-286-1533
Media:
Gary Hanson
602-286-1777
This
announcement is distributed by Nasdaq Corporate Solutions on behalf
of Nasdaq Corporate Solutions clients.
The issuer of this announcement warrants that they are solely
responsible for the content, accuracy and originality of the
information contained therein.
Source: Tesoro Corporation via Globenewswire
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