SAN ANTONIO -- Valero Energy Corp. last week agreed to sell a refinery and dozens of retail outlets in northern California in concessions required by the Federal Trade Commission prior to approving its proposed acquisition of Ultramar Diamond Shamrock Corp.
The proposed consent decree, reached with FTC staff, would require Valero to sell its Golden Eagle refinery in Benicia and 70 gas station/convenience stores, all now owned by UDS, in order to proceed with the $4 billion buyout. Valero announced its decision Monday.
Among the possible suitors of the refinery is Tesoro Petroleum Corp., where officials yesterday said they are exploring a possible bid for the assets. “This is the type of thing that we're interested in, and we're going to do our due diligence,” said Tesoro spokesman David Chacon. “We'll evaluate an appropriate bid, look into how to finance that bid, and see whether to proceed from there.”
According to published reports, analysts were pessimistic that Tesoro, which recently acquired two refineries from BP, Plc., is not in a position to finance the deal. The refinery is expected to sell for about $1 billion.
Terms of the consent decree must be approved by the five FTC commissioners before the deal is considered final. Combining Valero and UDS would create the one of the nation's largest refining companies, with a capacity of nearly 2 million barrels a day from a dozen refineries and roughly 5,000 retail outlets.
According to published reports, Valero had pushed to keep both of the UDS refineries in the profitable California market. Valero already owns a 165,000-barrel-per-day refinery in the San Francisco Bay area, not far from the Golden Eagle plant. The FTC wanted Golden Eagle sold to promote refinery competition in the area, with the gas stations made part of the deal to ensure a marketing outlet for Golden Eagle, which has a capacity of 168,000 barrels per day.
Assuming the merger goes through, Valero would have a year from the completion date, currently scheduled for Dec. 31, to sell off the refinery and associated retail operations, but the company said it would try to divest the assets by mid-2002. Valero would keep UDS' Wilmington refinery, a 145,000-barrel-per-day plant near Los Angeles.
