BEVERLY HILLS, Calif. -- Tracinda Corp., the private investment firm owned by billionaire Kirk Kerkorian, said that it plans to make a cash tender offer for up to 21.9 million shares of petroleum refiner-marketer Tesoro Corp., or about 16% of Tesoro's total shares outstanding, at the price of $64 per share. On the news, Tesoro shares jumped more than 11% in intra-day trading.
AWall Street analyst said Kerkorian's move could mean Tesoro is a ripe acquisition target."Kerkorian is interested in putting the company in play; he wants to make a quick buck," [image-nocss] said Fadel Gheit managing director of oil and gas research at Oppenheimer & Co. in New York.
The offer price represents an 11.9% premium over Tesoro's closing stock price of $57.20 on Thursday and a 36.7% premium over Tesoro's closing stock price on October 3, when it began amassing its current stake of 4% in Tesoro.
Beverly Hills, Calif.-based Tracinda, which currently owns 5.5 million shares of Tesoro, will own about 23.4 billion shares of the San Antonio, Texas-based company, representing about 20% of its total outstanding share, once the offer is completed.
Tracinda said it believes the fundamentals of the petroleum refining industry make it an attractive area for investment and it has chosen to invest in Tesoro because the company is well positioned within the industry and has a management team that is effectively executing its strategic plan.
Tesoro makes gasoline, jet fuel, diesel fuel, fuel oil, liquid asphalt and other fuel products. The company earned $801 million on revenue of $18.10 billion in fiscal 2006.
Tesoro confirmed that it is aware of the public announcement made by Tracinda Corp. regarding a proposed unsolicited partial tender offer to be made to Tesoro's stockholders from Tracinda. Tesoro's board, consistent with its fiduciary duties, and in consultation with its financial and legal advisors, will carefully review and consider Tracinda's proposed unsolicited partial tender offer and will, within 10 business days of the commencement of a tender offer (as required by the tender offer rules), advise Tesoro's stockholders of the board's position regarding the offer as well as its reasons for that position, it said in a statement.
The oil company urged its stockholders to defer making a determination whether to accept or reject Tracinda's proposed unsolicited partial tender offer until they have been advised of the board's position.
Tesoro did not return a CSP Daily News request for comment by presstime.
Refiners have performed strongly in recent years, reported RTTNews, but profit margins narrowed this summer due to a surge in crude oil prices. Earlier this week, Murphy Oil Corp. reported a 11% decline in third-quarter earnings due to weak refining margins. ConocoPhillips also reported a 5.2% decline in third-quarter earnings, hurt by weak refining margins and lower production volumes.
Tesoro reports third-quarter earnings on Thursday. Analysts polled by First Call/Thomson Financial currently expect the company to earn 85 cents per share on revenue of $2.81 billion for the third quarter. For the third quarter of last year, the company reported earnings of $1.96 per share and revenue of $5.28 billion.
Tracinda's major investments include a majority stake in the Las Vegas casino giant MGM Mirage. Tracinda formerly owned 10% of General Motors Corp. (GM), but sold all of its stock in November 2006. Earlier this year, Tracinda made headlines when it offered $4.5 billion for Chrysler, which was eventually sold to Cerberus Capital Management.
Tesoro is an independent refiner and marketer of petroleum products. Tesoro, through its subsidiaries, operates seven refineries in the western United States with a combined capacity of approximately 660,000 barrels per day. Its retail marketing system includes more than 900 branded retail gas stations, of which more than 445 are company operated under the Tesoro, Shell, Mirastar and USA brands.
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