In a further consolidation of the U.S. refining sector, Ultramar Diamond Shamrock Corp. (UDS) has agreed to acquire Total Petroleum (North America) Ltd.
The deal is valued at about $811 million, including UDS' assumption of $414 million of Total Petroleum debt. The definitive agreement, signed last week, provides for UDS to issue 3.22 shares for each outstanding share of Total Petroleum stock.
The deal, subject to regulatory review and approval by holders of two-thirds of Total Petroleum shares, is expected to close this summer. France's Total SA, holder of 55.5% of Total Petroleum shares, has agreed to vote those shares in favor of the deal.
Savings related to the transaction are expected to reach at least $50 million/year. That includes plans to consolidate administration into San Antonio, UDS headquarters. In addition, UDS intends to operate Total Petroleum facilities with 2 million bbl less inventories of crude oil, other feedstocks, and refined products.
Ultramar Diamond Shamrock itself is the result of a big merger less than a year old. Predecessor companies Ultramar Corp., Long Beach, and Diamond Shamrock Inc., San Antonio, agreed to merge last September in a union that created the third largest refiner in the U.S., with then-capacity of 475,000 b/d (OGJ, Sept. 30, 1996, p. 34).
The combination of company assets will result in one of the biggest refiner/marketers in North America, with refining capacity of about 650,000 b/d, 6,381 branded outlets in 19 states and six Canadian provinces, 5,679 miles of crude oil and refined products pipelines, and more than 23,000 employees. UDS has about 17,000 employees, Total Petroleum about 6,400 employees.
Refining expansion
The acquisition will increase UDS refining capacity by about 150,000 b/d by adding Total Petroleum's refineries at Alma, Mich.; Ardmore, Okla.; and Denver.
UDS currently estimates combined capacity of its four refineries in Texas, California, and Quebec at 500,000 b/d.
Once the acquisition is complete, says UDS, the company plans to increase efficiency and operating reliability of the Total refineries and integrate them into the UDS crude/products system.
UDS' refineries are linked to its key retail and wholesale markets through a supply distribution network of 4,543 miles of crude oil and refined products pipelines. Total Petroleum operates 1,136 miles of pipeline and 11 terminals.
UDS also has a big home heating oil business in eastern Canada and New England and a petrochemical business.
Marketing expansion
The addition of Total Petroleum's 2,127 branded outlets, 560 of which are company-owned and operated, will greatly expand UDS' retail presence.
Total Petroleum has a significant presence in the Rocky Mountain and Midcontinent states, while UDS has 4,254 outlets in the Southwest and northeastern Canada, with 1,724 of these company-owned and operated.
UDS plans to rebrand Total Petroleum's outlets in Texas, Colorado, and Oklahoma as Diamond Shamrock and maintain the Total name in remaining markets.
"Total Petroleum operates first-class convenience stores with high merchandise volumes and growing fast-food sales that complement our stores," said UDS Chairman and CEO Roger Hemminghaus. "By leveraging both our companies' considerable strengths in merchandising, fast foods, credit cards, and fuels marketing under one company, we will create new opportunities for cost savings and operating synergies, while offering more convenient locations and better service and value to our customers."
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