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BRENTWOOD, Tenn. — Eight weeks after reaching a definitive agreement to bring all of Alon USA Energy Inc. into its fold, Delek US Holdings Inc. said the deal is on track to close on schedule.
The two companies announced the transaction on Jan. 3. Under the terms of the agreement, Delek US will acquire all the outstanding shares of Alon common stock it does not currently own in an all-stock transaction. As of Dec. 31, Delek owned roughly 47 percent of Alon's outstanding stock — which it acquired in May 2015.
Delek US' board of directors and a special committee of Alon's board of directors unanimously approved the agreement. Additionally, Alon's board approved the transaction, excluding Delek-employed directors who abstained from voting on the matter.
The combination is expected to create a company with a strong financial position and significant access to the Permian Basin. Located in the Midland/Odessa region of Texas, the Permian Basin has long been one of the most important oil and gas-producing areas of the United States.
According to Uzi Yemin, chairman, president and CEO of Delek US Holdings, the agreement is on course to close by midyear, subject to approval by the shareholders of both companies.
"We remain excited about the opportunity that will be created through the acquisition. We believe we can create approximately $95 million of pre-tax synergies and have the potential to unlock $78 million of EBITDA from logistic assets that currently reside within Alon," Yemin explained during the company's earnings call Tuesday.
Assi Ginzburg, executive vice president and chief financial officer, further reported that Delek US was preparing to file a S-4 with the Securities and Exchange Commission (SEC), the form used by a publicly traded company to register any material information related to a merger or acquisition.
"Our goal [on Feb. 28] is to file the S-4; we hope to do that as soon as the market opens. That will give the SEC the opportunity to start reviewing the material," Ginzburg explained.
If the SEC does not have any material comments on the transaction, "we can probably be very close to closing the transaction" within 50 days, which would put the date somewhere in early May. If the SEC comes back with some questions, the deal could close as late as June 1, according to Ginzburg.
"That's our goal right now. Everything on both sides is on track to be prepared to respond to SEC questions," he said.
DELEK US' Q4 EARNINGS
For the fourth quarter of 2016, Delek US reported net income of $44.2 million, compared to a net loss of $31.5 million in the fourth quarter of 2015. Included in the company's reported results for the 2016 fourth quarter was an after-tax gain of $80.6 million attributed to the sale of the company's retail assets, including MAPCO.
"In November, we closed a transaction to sell our retail-related assets to COPEC for $535 million plus a working capital adjustment and retail cash on hand at closing. This resulted in proceeds of approximately $379 million before taxes," Ginzburg said, adding the taxes are expected to be paid in the first and second quarter of this year.
The sale of Delek US' MAPCO Express closed Nov. 16 and gave new owner Compañía de Petróleos de Chile COPEC S.A. (COPEC) a foothold in the United States, as CSNews Online previously reported.
Overall, Ginzburg said Delek US improved its financial flexibility in the fourth quarter, ending with approximately $689 million of cash on a consolidated basis and $145 million of net debt.
Brentwood-based Delek US is a diversified downstream energy company with assets in petroleum refining and logistics.
Dallas-based Alon USA Energy is an independent refiner and marketer of petroleum products, operating primarily in the South Central, Southwestern and Western regions of the United States. Alon is the largest 7-Eleven licensee in the United States and operates approximately 300 convenience stores that also market motor fuels in Central and West Texas and New Mexico.