SAN ANTONIO -- Tesoro Corp.’s acquisition of Western Refining Inc. is on target to close in the first half of 2017; “integration planning is well underway and a planning team of representatives was established in December to ensure an effective and efficient transition,” said Greg Goff, CEO of Tesoro, during the company’s fourth-quarter 2016 earnings call.
Tesoro announced on Nov. 17, 2016, it was acquiring Western Refining for $37.30 per share in a stock transaction valued at $4.1 billion based on Tesoro's closing stock price of $85.74 on Nov. 16, 2016.
“The acquisition is expected to create a premier, highly integrated and geographically diversified refining, marketing and logistics company and provide a strong platform for earnings growth and cash-flow generations,” Goff said. “We remain committed to delivering $350 million to $425 million in annual synergies from operational improvements, value-chain optimization and corporate initiatives.”
Through the Enterprise Integration Office (EIO) team, which includes Tesoro and Western Refining representatives, the company's integration planning continues to prepare for the potential closing of the transaction. Last week, the team participated in a full-day workshop in Tempe, Ariz., to further refine integration plans and identify any interdependencies between the various functional and business work streams.
“We had a great workshop and each of our work streams are progressing well," Mark Wilson, vice president of enterprise integration, said in a separate filing with the U.S. Securities and Exchange Commission (SEC). “The EIO team is driven by a common purpose and vision for our proposed combined company, and we look forward to sharing in the opportunities that a larger organization will provide.”
Additionally, work has just begun to ensure a successful transition by planning the organizational model for Day 1, which the company said it expects to announce at or near the close of the transaction.
“Bringing together these two great companies and realizing the full potential of the new combined company will not happen overnight,” said Wilson. “The work to fully integrate our organizations will begin after the close, so the Day 1 focus is on continuing safe and reliable operations and protecting business value. We expect that there will be minimal organizational and operational changes on Day 1.”
Tesoro reported fourth-quarter net earnings from continuing operations of $78 million, compared to $54 million a year ago. Consolidated net earnings were $101 million for fourth-quarter 2016 compared to $83 million for the same period last year. EBITDA for fourth-quarter 2016 was $468 million compared to $388 million last year.
For marketing, “2016 was another strong year of operating performance and volume growth,” Goff said. “We continue to successfully execute our strategy of optimizing the placement of our refined products through the most valuable channels.”
The company increased its same-store sales by approximately 1% in 2016 and increased its branded store count by 4%, or 95 stores year over year to 2,492.
“We expect to see continued favorable market fundamentals in 2017, driven by a strong economy and growth in consumer demand in the regions in which we operate,” said Goff. “We continue to implement site improvements, which drive higher fuel volumes and a better customer experience and expand our network of stations by leveraging our extensive brand portfolio.”
San Antonio-based Tesoro is an independent refiner and marketer of petroleum products. It operates seven refineries in the Western United States. Tesoro's retail-marketing system includes more than 2,400 retail stations under the Arco, Shell, Exxon, Mobil, USA Gasoline, Rebel and Tesoro brands.
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