NEW YORK -- After only six hours of trading, Delek US Holdings Inc. found itself with more than $104 million in its pocket yesterday. The fresh income came from the more thansix million shares of stock the Franklin, Tenn.-based company sold during its initial public offering of stock. At the close of the IPO on Tuesday, May 9, the refining and retailing company expects to receive net proceeds of approximately $149.6 million.
That money will go toward debt repayment, capital improvements and future acquisitions of both refineries and convenience stores, [image-nocss] according to president and CEO Erza Uzi Yemen. We want to use the profits for growth, Yemen told CSP Daily News, and we're talking about both organic growth and through acquisition.
Delek US Holdings is a diversified energy business focused on petroleum refining and supply and on retail marketing.The refining segment operates a high-conversion, independent refinery in Tyler, Texas.The retail segment markets gasoline, diesel and other refined petroleum products and convenience merchandise through a network of 349 company-operated retail fuel and convenience stores under the MAPCO Express, East Coast and Discount Food Mart banners in the southeastern United States.
In its IPO filing with the Securities & Exchange Commission (SEC), the company stated, We expect that major oil and gas companies and independent retailers will continue to divest refining and retail assets, providing us with acquisition and growth opportunities. We also expect that limited refining capacity in the United States, along with increasing refinery utilization rates and demand for refined petroleum products, will benefit our refining segment.
The U.S. convenience store industry is highly fragmented, which we expect will lead to additional acquisition opportunities as companies decide to exit the sector to focus on their core businesses and as smaller operators are unable to compete with larger companies in the sector with their economies of scale and stronger purchasing power. Our retail business is currently concentrated in the southeastern United States. This market, including states adjacent to those in which we currently operate, or in which we currently have a small number of stores, provide additional expansion opportunities.
Although Yemen said he has not set an ultimate goal for company retail growth, the company Web site states the chain has strategic growth plans to expand to over 500 stores in the next three years.
Yemen said most of that growth will be in the company's current marketing area, but he did not rule out eventual growth beyond those states. [We have] no particular number, and when you ask how long, there's no specific timeline, he said. We want to stay in that [southeast] area, but do I want to commit to you today that it won't change? No.
Upon completion of the offering, the company will have more than 49 million shares of common stock outstanding, including 39 million shares of common stock held indirectly by its parent company, Delek Group Ltd. Delek US Holdings has granted the underwriters a 30-day option to purchase up to an additional 1.5 million shares of common stock. Ultimately, the IPO could infuse the company with $149 million in cash.
Yemen said the IPO should not force a change to the company's mode of operation because parent company Delek Group, which will remain the majority shareholder, is a public company in Israel. In the past, our ultimate parent company was a public company, he said. Basically, we were reporting to the public in Israel, [so it won't be much different].
Lehman Brothers Inc. and Citigroup Global Markets Inc. are acting as joint book-running managers for the offering, and Credit Suisse Securities LLC, HSBC Securities Inc., Morgan Keegan & Co. Inc., William Blair & Co. LLC, SunTrust Capital Markets Inc. and IDB Capital Corp. are acting as co-managers.
[Pictured: Representatives of Delek US Holdings Inc. celebrate the company's initial public offering of 10 million shares of its common stock at the New York Stock Exchange May 4, 2006.The company trades on the NYSE under the ticker symbol DK.]
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