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BRENTWOOD, Tenn. — Delek U.S. Holdings Inc. proposed to acquire the remaining portion of Alon USA Energy Inc. it does not already own. The all-stock transaction would see Alon stockholders receive 0.44 of a share in Delek for each share of Alon owned.
“We believe both companies are currently undervalued to differing extents by the market, and our proposal reflects, in the context of the current and prospective challenges facing Delek’s and Alon’s sector, our view of the relative fundamental values of Alon and Delek; each company’s respective outlook and balance sheet profile; and potential synergies for the transaction,” Delek Chairman and CEO Uzi Yemin wrote in an Oct. 14 letter that was disclosed in an U.S. Securities and Exchange filing.
“We believe this combination would create significant value for the respective stockholders of Delek and Alon in both the near- and long-term, and the 100-percent equity consideration would allow Alon stockholders, many of whom are also currently Delek stockholders, the opportunity to fully participate in that value creation as it is realized,” he wrote.
Delek already owns 48 percent of Alon. During an August 2015 earnings call, Yemin said his company is “not in the business” of owning only 48 percent of any publicly traded company. Yemin added Brentwood-based Delek should acquire all of Dallas-based Alon in less than four years from this August 2015 date, but did not speculate further at that time.
“A combination with Delek would allow Alon stockholders to take part in a formidable combined company to weather the current downturn in the industry and emerge in a position of substantial strength as margins improve,” Yemin wrote in his letter. “When taken together, these factors collectively position a combined company to be a peer-leading enterprise in the refinery space for the long-term.”
MAPCO and MAPCO Express convenience stores will not be part of the proposed transaction. As CSNews Online reported, Delek U.S. Holdings Inc. in late August signed a definitive agreement to sell the retail network to Compañía de Petróleos de Chile COPEC S.A. (COPEC). The deal carries a $535-million price tag and covers 100-percent interest in MAPCO and certain affiliated companies.
Alon, North America’s largest 7-Eleven licensee, had 306 convenience stores as of June 30. In July, it formed a special committee to review a number of strategic alternatives, including a potential business combination with Delek US Holdings Inc.; the analysis of capital investments; shareholder distributions; or a sale or merger and spinoff or separation of a selected business.
The merger would likely require shareholder approval from both companies.
“Please be aware that this proposal is an expression of interest only, and we reserve the right to withdraw or modify our proposal at any time and for any purpose,” Yemin concluded in his letter, written to Alon’s Executive Director David Wiessman. “We believe our proposal presents a compelling opportunity for Alon’s stockholders and look forward to your response.”