BRENTWOOD, Tenn. – Uzi Yemin, chairman, president and CEO of Delek US Holdings Inc., was watching the Super Bowl on February 2 when he got the first phone call from Alon Israel, he said during the company’s first-quarter 2015 earnings call. “So I thought I was scoring a touchdown myself,” he said.
And on April 14, 2015, Delek US entered into a definitive stock purchase agreement with Alon Israel Oil Co. Ltd. to acquire approximately 33.7 million shares, or approximately 48% of the outstanding shares, of Alon USA Energy Inc. common stock owned by Alon Israel.
The companies expect this transaction, which has received Hart-Scott-Rodino clearance, to close as early as May 12, 2015.
The agreement “presents a significant step in our growth, and the assets fit well strategically and geographically with our existing footprint,” Yemin said. “It also provides a step forward, doubling the size of our company, which is one of our target to accomplish every five years.”
Alon “was a very big seller, [and] we know them very, very well. They wanted a good transaction. We couldn’t go to a full Alon [merger], or they didn’t want the full Alon merger because they wanted that to close as quickly as possible because of their needs, and that presented great opportunity for us and we took it.”
He added, “With their footprint and the fact that they have logistic assets, they have retail, they fit very nicely with our assets."
Delek US operates refineries in Tyler, Texas, and El Dorado, Ark. “We believe that two refineries are not sufficient enough to be in our business,” said Yemin.
Alon USA operates refineries in Big Spring, Texas, and Paramount, Long Beach and Bakersfield, Calif., as well as in Krotz Springs, La.
Yemin also said that "when the market conditions are right" the company will look "very seriously" at acquired 100% of Alon USA.
During the first year following the closing of this transaction, the current agreement allows Delek US to acquire up to 49.99% of the outstanding shares of Alon USA, with additional ownership above this threshold subject to approval of Alon USA’s board. The stockholder agreement will expire on the first anniversary of the closing of this transaction, and Delek US will then have no further restrictions on ownership in Alon USA.
Delek executives will have a “significant presence” on Alon USA’s board, with four executives joining Yemin as chairman.
Delek US Holdings reported a first-quarter net loss of $16.1 million, versus net income of $33.7 million in the quarter ended March 31, 2014.
Retail segment contribution margin increased year-over-year primarily due to higher fuel margins and gallons sold. Fuel gallons sold increased to 108.7 million from 97.8 million in the prior-year period and merchandise sales increased to $94.5 million compared to $89.4 million. On a same-store sales basis, fuel gallons sold increased 6.0% and merchandise sales increased 3.5% from first quarter 2014. The increase in same-store fuel gallons was primarily driven by improved performance from the large-format store category on a year-over-year basis.
At the end of the first quarter 2015, there were 64 large-format convenience stores in the portfolio.
The company is a diversified downstream energy company with assets in petroleum refining, logistics and convenience-store retailing. It also own approximately 62% (including the 2% general partner interest) of Delek Logistics Partners LP, a master limited partnership (MLP) focused on owning and operating midstream energy infrastructure assets. The retail segment markets motor fuel and convenience merchandise through a network of approximately 360 company-operated convenience stores operated under the Mapco Express, Mapco Mart, East Coast, Fast Food & Fuel, Favorite Markets, Delta Express and Discount Food Mart brand names.