SAN ANTONIO, Texas -- Tesoro Petroleum Corp. has reached a definitive agreement to acquire Valero Energy Corp.’s 168,000-barrel-per-day Golden Eagle refinery in Contra Costa County, Calif., as well as 70 associated Beacon retail gasoline station/convenience stores in Northern California, for $945 million, plus inventories estimated at $130 million. The agreement also includes additional consideration of up to $150 million via an earn-out payment based on historical five-year margins. The deal, funded with debt and equity, is expected to close in April, subject to approvals.
Federal regulators ordered the assets to be sold as a condition of the Valero/Ultramar Diamond Shamrock merger agreement. The refinery and retail assets are currently in a “hold-separate” arrangement pending their divestiture.
After this transaction, San Antonio-based Tesoro will have six refineries and a retail network of more than 750 outlets in several western states. Many of its more than 160 company-owned and operated retail units feature 2Go Tesoro c-stores. Its outlets include nearly 60 Mirastar units at Wal-Mart locations in the West.
Of the 70 Beacon stations, all to be rebranded to Tesoro, 57 are company owned and 13 are leased. The units average 190,000 gallons per store per month (10,400 bpd), $46,500 in c-store sales per month and $21,000 in operating expense per store per month, the companies said.
In a conference call this morning, Bruce Smith, Tesoro’s chairman, president and CEO, said that acquisition is a “clear strategic fit [with] good market fundamentals [offering] synergies and operating improvements.” But most importantly, it “provides additional Tesoro supply for independent marketers and expansion of [the] Tesoro brand.”
Tesoro promises a smooth transition. “Integration teams are already being established that will include retail and refinery employees from these assets,” said Smith in an earlier statement. “We have met several of the key people at Golden Eagle and we know that they’re strong operators who share the same high standards towards safety, environmental sensitivity and active involvement in the communities in which we live and work.”
He added, “Our commitment is to retain all the employees, offering them comparable pay and benefits. We value, respect and appreciate the contributions and efforts of the Golden Eagle and Beacon employees. They are a talented group of individuals and we look forward to having them as a part of the Tesoro family.”
“The people who run the Golden Eagle and Beacon business are skilled professionals, and Tesoro plans to provide the investment and the tools necessary for them to continue operating with the highest degree of safety possible,” Smith said. “This transaction gives Tesoro access to one of the largest markets in the country, and it boosts Tesoro’s daily production capacity by more than 40 percent.”
“This is a win-win situation for everyone,” said Bill Greehey, Valero’s chairman and CEO. “It is great news for our shareholders because we plan to use the proceeds from the divestiture to pay down debt and buy back our stock. This will strengthen our balance sheet and position the company for future growth opportunities.”
Valero, also based in San Antonio, owns and operates 12 refineries in the U.S. and Canada with a combined throughput capacity of approximately 2 million bpd. It is one of the nation’s largest retailers of petroleum products with nearly 5,000 retail outlets in the U.S. and Canada under brands including Diamond Shamrock, Ultramar, Valero, Beacon and Total.
