EL PASO, Texas & SCOTTSDALE, Ariz. -- Western Refining Inc. and Giant Industries Inc. have announced that the boards of both companies have unanimously approved an amendment to their merger agreement. Under the amended agreement, Western will acquire all of the outstanding shares of Giant for $77 per share in cash.
Since the original agreement was announced on Aug. 28, 2006, a number of unexpected events have occurred at Giant's facilities, which have resulted in the amended agreement. Central to these events were a recent fire at Giant's Yorktown [image-nocss] refinery, which forced Giant's ultra-low-sulfur diesel (ULSD) processing unit to be shut down, a separate fire at Giant's Ciniza refinery and the resulting increased costs and modified terms associated with Giant's insurance coverage. Giant's ULSD processing unit at its Yorktown refinery is expected to be fully operational by mid-February 2007, and Giant's Ciniza refinery is expected to be fully operational by mid-December 2006.
After absorbing Giant, the new Western will be the fourth largest publicly traded independent refiner and marketer in the United States, going from one to four refineries and gaining a retail network through Giant's 159 gas stations and convenience stores.
The boards of both companies unanimously approved the original agreement, under which Western would acquire all of the outstanding shares of Giant for $83 per share in cash. The transaction was valued at approximately $1.5 billion, including approximately $275 million of Giant's outstanding debt. The reduced price lowers the total value of the deal to approximately $1.13 billion, said The Business Journal of Phoenix.
The merged company will have a total crude oil throughput capacity of approximately 216,000 barrels per day (bpd). In addition to Western's 117,000-bpd refinery in El Paso, Texas, Western Refining will gain an East Coast presence with a 62,000-bpd refinery in Yorktown, Va., and will gain two refineries in the Four Corners region of Northern New Mexico with a current combined capacity of 37,000 bpd.
Western's primary operating areas will encompass the Mid-Atlantic region, far West Texas; Phoenix and Tucson, Ariz.; Northern Mexico; Albuquerque, N.M.; and the Four Corners region of Utah, Colorado, Arizona and New Mexico. In addition to the four refineries, Western's asset portfolio will include refined products terminals in Flagstaff, Ariz., and Albuquerque, as well as asphalt terminals in Phoenix, Tucson, Albuquerque and El Paso. Western's asset base will also include 159 retail stations and c-stores in Arizona, Colorado and New Mexico, a fleet of approximately 100 crude oil and finished product truck transports and two wholesale petroleum products distributors, Phoenix Fuel Co. Inc. in Arizona and Dial Oil Co. in New Mexico.
Following the close of the transaction, Paul Foster will remain president and CEO of El Paso, Texas-based Western, and Fred Holliger will serve as a special advisor to Western's board. The combined company will be headquartered in El Paso, and will maintain offices in Scottsdale, Ariz., Giant's home.
Closing of the transaction is subject to approval by Giant shareholders and the satisfaction of other closing conditions. As previously announced, Western and Giant have received a request for additional information from the Federal Trade Commission (FTC) in connection with the transaction. They are working cooperatively with the FTC staff and expect to respond to the request in a timely manner. The transaction is currently expected to close in first-quarter 2007 and is not subject to any financing conditions.
Giant Industries has just reported net earnings of $44 million, or $3.00 per diluted share for the third quarter ended Sept. 30, 2006. Net earnings were $46.6 million, or $3.38 per diluted share in third-quarter 2005. The company reported net earnings of $80.9 million, or $5.51 per diluted share, for the first nine months of 2006 compared to net earnings of $77.3 million, or $5.80 per diluted share in 2005.
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