BRENTWOOD, Tenn. -- Delek U.S. Holdings Inc. is now in line to become 100% owner of Alon USA Partners LP, more than two years after buying a 48% share of the company.
In an all-stock-for-common-units merger transaction, Delek U.S. will acquire all of the outstanding Alon Partners common units representing limited-partner interests that Delek U.S. or its affiliates do not already own.
Brentwood, Tenn.-based Delek U.S. bought 48% of Alon in April 2015. It now owns 100% of the general partner and about 51 million common units of Alon Partners, or about 81.6% of the outstanding units. This latest transaction will give Delek 100% ownership of Alon USA Partners.
Alon USA Partners, Dallas, is a limited partnership that owns and operates a crude-oil refinery in Big Spring, Texas. It refines crude oil into finished products marketed primarily in Central and West Texas, Oklahoma, New Mexico and Arizona through its integrated wholesale distribution network to convenience stores owned by Delek U.S. and other third-party distributors.
In November 2016, Delek U.S. sold about 350 c-stores in Tennessee, Alabama, Georgia, Arkansas, Virginia, Kentucky and Mississippi under the Mapco Express, Mapco Mart, East Coast, Fast Food and Fuel, Favorite Markets, Delta Express and Discount Food Mart names to Santiago, Chile-based Compania de Petroleos de Chile COPEC SA (COPEC) for $535 million and Mapco’s estimated cash on hand and working capital adjustment, totaling $16.3 million.
Seven months later, Delek U.S. took ownership of Alon USA Energy Inc., closing on the acquisition of the remaining outstanding shares of Alon USA Energy common stock in an all-stock transaction on July 1. Following the closing, Delek U.S. had about 82 million shares outstanding.
The convenience-store retail business Delek U.S. acquired with Alon USA is the largest 7-Eleven licensee in the United States and operates about 300 c-stores that market motor fuels in Central and West Texas and New Mexico.
The new Delek U.S. is a diversified downstream energy company with assets in petroleum refining, renewable fuels, asphalt, logistics, wholesale marketing operations and convenience-store retailing.
“This was one of our strategic initiatives following the acquisition of Alon USA on July 1, 2017,” said Uzi Yemin, chairman, president and CEO of Delek U.S. “It should allow us to simplify our corporate structure, reduce public company costs, reallocate cash flow from distributions to growth investments and enable us to efficiently dropdown logistics assets to Delek Logistics Partners in the future. In addition, we should be able to move forward to capture cost of capital synergies as we utilize the balance sheet of Delek U.S. to refinance high cost debt at Alon Partners.”
He said that “for Alon Partners public unitholders, the transaction gives them ownership in a larger, more diverse organization with increased daily trading volume through Delek U.S. shares.”
The conflicts committee, made up of independent members of the board of Alon Partners’ general partner, negotiated, reviewed and approved the merger terms. It unanimously approved the merger, the merger agreement and the related transaction. As part of its evaluation process, the conflicts committee retained independent legal and financial advisers. The transaction was also approved by the Delek U.S. board and, upon the recommendation of the conflicts committee, the board of Alon Partners’ general partner.
The companies said they expect the transaction to close in first-quarter 2018. The approval and adoption of the merger agreement and the merger by Alon Partners requires approval by a majority of the outstanding Alon Partners common units. A subsidiary of Delek U.S., which owns a sufficient number of Alon Partners common units to approve the merger on behalf of all Alon Partners public unitholders, has executed a support agreement in which it has irrevocably agreed to consent to the merger. No vote of Delek U.S. stockholders is required.
The closing of the merger is subject to customary closing conditions.
Delek U.S. Holdings is a diversified downstream energy company with assets in petroleum refining, logistics, asphalt, renewable fuels and convenience-store retailing. The refining assets consist of refineries in Tyler and Big Spring, Texas; El Dorado, Ark.; and Krotz Springs, La. Delek U.S. Holdings, through its subsidiaries, currently owns 100% of the general partner and approximately 81.6% of the limited partner interests in Alon Partners, which owns the crude oil refinery in Big Spring and an integrated wholesale marketing business.
The logistics operations primarily consist of Delek Logistics Partners LP, a growth-oriented master limited partnership (MLP) focused on owning and operating midstream energy infrastructure assets. Delek U.S. Holdings and its affiliates also own about 63% (including the 2% general partner interest) of Delek Logistics Partners.