DALLAS -- The Fimi Fund, headed by Yishai Davidi, is conducting advanced negotiations to invest $60 million to $70 million in Alon USA, reported Israeli business newspaper Calculist. It has learned that half of the sum will be transferred to Alon in exchange for stock options, while the rest will serve as a loan, it said.
While Alon USA has seen operational profits in the retail sector, Fimi's potential investment is related to Alon USA's refinery problems, the paper said. During the first nine months of 2010, Alon USA lost $100 million, in addition to the $90 [image-nocss] million that it lost in 2009. The losses were caused primarily by a series of "very expensive acquisitions at a particularly problematic time," said the report.
One example, according to Calculist, was the purchase of a refinery in Krotz Springs, La., for $400 million. The company completed the transaction during the second half of 2008, when oil prices were high, despite analysts' warnings of the expected blow to large refineries due to the high costs of raw materials.
Alon USA was issued in the United States in 2005, valued at $725 million, and within a few days its value shot up to $950 million, the report said. The financial crisis, along with a blast at one of the company's refineries in Dallas, brought on a "major predicament," the paper said, and the company is currently valued at $300 million. In March 2010, Moody's Investors Service published a list of 283 companies that its economists believed would become insolvent, said the report, and Alon USA was listed among them.
Last August, due to its decreasing funds and transition from profits to losses, the paper said, Alon USA announced a rights issue of $40 million, $30 million of which would be funded by the owners. At the conclusion of the third quarter of this year, the refinery industry marked an operational loss of $52 million, and during the first nine months of the year, the company's losses reached nearly $100 million.
The company, which is traded on the New York Stock Exchange, controls five refineries in Texas, Louisiana and California, and manufactures asphalt. Under the brand name FINA, the company provides fuel to 1,000 gas stations and it is licensed to establish and operate 7-Eleven convenience stores. At present, the company operates 306 stores under the brand name.
Alon USA has experienced operational profits of $9 million per quarter in the retail market, said the report. To leverage the success of this sector, while improving its financial state, Alon USA plans a stock issue of its retail activities, including the c-stores and gas stations, in the United States at a value of $180 million to $200 million, the report said.
Dallas-based Alon USA is controlled by Alon Holdings, which also controls Blue Square, Israeli gas station operation Dor Alon and real-estate company Rozbar, which operates mainly in Europe.
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