BRENTWOOD, Tenn. --Delek U.S. Holdings will more than double its refining capabilities and pipeline space with its purchase of the remaining outstanding shares of Alon USA, creating a “stronger, more diverse company,” according to Delek President and CEO Uzi Yemin.
Delek U.S., which already owned 47% of Alon USA, entered into a definitive agreement Jan. 3 to acquire all remaining shares of Alon common stock, as reported in a McLane/CSP Daily News Flash.
While the $464 million deal, expected to close in the first half of 2017, makes Delek U.S. the seventh-largest independent refiner, it raises questions about what will happen to Alon Brands' convenience-store assets.
Here’s where things stand today …
Alon is the largest 7-Eleven licensee in the United States and operates approximately 300 convenience stores that also market motor fuels in central and west Texas and New Mexico.
But the acquisition comes two months after Delek U.S. Holdings closed a deal to sell its 348 c-stores, mostly branded Mapco Express, to Chile’s Compania de Petroleos de Chile SA (COPEC).
The future of Alon’s 7-Eleven stores will come down to an analysis of the chain and a test of the same “megastore” concept through which Delek put its Mapco Express stores.
“There’s potential there because of the area,” Yemin said during a conference call Tuesday, referring to growing markets in Texas and New Mexico. “That potential needs to be evaluated. We would like to explore the opportunity to build some megastores in the area before we decide we want to sell all of these stores.”
Mapco has built 10 to 12 large-format (5,000 square feet or more) c-stores per year, incorporating new programs and updating store layouts.
“This allows us to improve our portfolio of stores by moving away from the 2,000-square-foot store,” Yemin said in 2014. “This larger format offers a wider product selection and a prepared-food offering, improving the shopping experience for our customers.”
He’d like to see if Alon’s sites show similar or better sales growth if put through the same process, which could be led by executive vice president Tony Miller, who oversaw Mapco retail and remains with Delek U.S. even after the stores were sold to COPEC.
Other elements of Delek U.S. Holdings’ acquisition of Alon USA include:
- A combination that creates a Permian Basin-focused company with refining, logistics, retail and marketing operations with a combined enterprise value of approximately $2.8 billion
- An all-stock transaction at a fixed exchange ratio of 0.5040
- Annual synergies of $85 million to $105 million expected to be achieved in 2018
- Expected to be highly accretive in 2018 on an EPS (earnings per share) basis, the combined company’s first full year of operation
- Creates ability to unlock significant logistics value through future potential drop-downs to Delek Logistics Partners LP
- Larger asphalt and renewables operations created through combination
- A combined company that benefits from Delek U.S.’ strong balance sheet
- Delek board-approved $150 million share repurchase authorization
“We are excited to be joining Delek U.S. and believe this agreement represents an excellent opportunity for Alon’s shareholders,” said David Wiessman, chairman of Alon’s special committee that worked on the deal. “The economies of scale, financial strength and synergies generated through this merger create the opportunity to drive long-term value for shareholders, and the all-stock transaction allows all shareholders to participate in the future performance of the combined company.”