Oil refiner Tesoro is offering 0.435 of its shares, with a cash alternative of US$37.30 a share, for each Western Refining share, valuing its competitor at US$4.1bn, or US$6.4bn once you add Western Refining’s debt to the cost of the deal.
Tesoro has set aside a kitty of around US$404mln to cover the cash element of the offer, and should this be exhausted then applications to receive cash will be scaled down accordingly.
The combined company is looking to squeeze out US$350mln to US$425mln in annual synergies within the first two years of the merger.
“Our increased scale and diversity will enable us to leverage and enhance in-house technical capabilities, which we expect will result in cost efficiencies, the ability to drive more growth and increased productivity,” said Greg Goff, who is not only chairman but also chief executive officer of Tesoro.
Once the deal goes through, Tesoro will get its mitts on Western’s refineries in Texas, New Mexico and Minnesota, adding to its own refineries sin California, Washington, Alaska, Utah and North Dakota.
Combined, the companies will have the capacity to refine more than 1.1mln barrels of oil a day.
Goff will continue in his multi-role position (he is also president of Tesoro) as boss of the combined group, while Western’s executive chairman, Paul Foster, and Western’s chief executive officer, will join the Tesoro board.
Shares in Tesoro rose 2.2% to US$87.59 on the news.
Story by ProactiveInvestors