Delek US Holdings Inc., Brentwood, Tenn., has agreed to acquire a minority interest in Alon Israel Oil Co. Ltd.’s US-based refining and marketing subsidiary Alon USA Energy Inc., Dallas, which owns and operates a 74,000-b/d refinery in Krotz Springs, La., as well as an idled 70,000-b/d, three-refinery complex in California.
Under the definitive stock purchase agreement, Delek US will acquire 33.7 million outstanding shares of Alon USA for a 48% ownership stake in the company, Delek US said.
To finance the deal, Delek US will provide Alon Israel with the following as consideration:
• Six million shares of Delek US restricted common stock.
• An unsecured $145 million promissory note maturing in January 2021.
• $200 million in cash, which is to be funded with a combination of cash on hand and borrowings on new or existing credit facilities.
While Delek US said it may issue another 200,000 shares of its common stock to Alon Israel as part of financing the transaction, the company did not identify circumstances under which the additional stock issuance might occur.
Based upon a closing price of $37.90/share for its common stock on Apr. 14, Delek US valued the purchase agreement at about $572.4 million.
The deal with Alon Israel follows a previous stockholder agreement with Alon USA which will allow Delek US to acquire up to 49.99% of outstanding shares in Alon USA at its discretion, with additional ownership above this threshold subject to approval by Alon USA’s board of directors, within a year of closing on the current transaction, Delek US said.
Following expiration of the stockholder agreement, which will occur on the first anniversary of the current transaction’s closing date, Delek US will have no further restrictions on ownership in Alon USA, the company said.
Pending governmental and third-party approvals, Delek US said it expects to complete its deal with Alon Israel during second-half May.
In addition to its Krotz Springs and California refining operations, Alon USA also holds an 82% interest in Alon USA Partners LP which owns a 73,000-b/d refinery in Big Spring, Tex. (OGJ Online, July 8, 2014).
In California, Alon USA continues to advance a government-approved plan to expand existing receiving and processing options for North American shale light crude oils at its Bakersfield refining complex despite legal challenges from environmental groups (OGJ Online, Oct. 10, 2014; Sept. 10, 2014).
While the company initially expected construction of the expanded rail terminal at Bakersfield to be completed by yearend 2015, start-up of rail unloading operations have been delayed until 2016, the company said in a February presentation.
