Blog Coverage Delek to Acquire Outstanding Stake in Alon for an Equity Value of $464 Million

LONDON, UK / ACCESSWIRE / January 4, 2017 / Active Wall St. blog coverage looks at the headline from Delek US Holdings Inc. (NYSE: DK) and Alon USA Energy, Inc. (NYSE: ALJ) announced on January 03, 2017 that it will acquire all of the outstanding shares of Alon USA Energy, Inc., which Delek US does not already own in an all-stock transaction. The combination will create a Permian focused company with refining, logistics, retail, and marketing operations with a combined enterprise value of approximately $2.8 billion. Register with us now for your free membership and blog access at: http://www.activewallst.com/register/.

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The Transaction Details

Prior to the transaction, Delek owned approximately 33.7 million shares, or 47% of common stock, of Alon. Under terms of the agreement, the owners of the remaining outstanding shares in Alon, that Delek does not currently own, will receive a fixed exchange ratio of 0.5040 Delek shares for each share of Alon. This represents a 5.6% premium to the 20 trading day volume weighted average ratio through and including December 30, 2016, of 0.477. Based on a closing price of $24.07 per share for Delek’s common stock on December 30, 2016, the implied price for Alon’s common stock is $12.13 per share, or $464 million in equity value for the remaining shares. The enterprise value of the transaction to acquire the remaining 53% of Alon’s shares of common stock not already owned by Delek is approximately $675 million, including the proportionate assumption of $152 million of net debt related to this transaction and $59 million of market value for the non-controlling interest in Alon USA Partners, L.P.

Approvals and Timing

The transaction is expected to close in H1 2017 and is subject to customary closing conditions, including regulatory approval and approval by a majority of votes cast of Delek’s shareholders and approval by the holders of a majority of the remaining 53% of Alon’s shares, which excludes the 47% of Alon’s shares already owned by Delek US.

The transaction was unanimously approved by the Special Committee of Alon’s board of directors and by the board of directors of Delek. Upon closing, the combined Company will be primarily led by Delek’ management team. In conjunction with the Merger Agreement, the Special Committee of Alon’s board of directors will nominate one new director that will be appointed to the Delek’s board, and one new director that will be added to the board of Delek Logistics Partners L.P.’s general partner.

The Combined Company

Post completion of the transaction, the merged entity will have a broad platform consisting of refining, logistics, retail, wholesale marketing, as well as renewables and asphalt operations. The refining system will have approximately 300,000 barrels per day of crude throughput capacity consisting of four locations and an integrated retail platform that includes 307 locations serving central and west Texas and New Mexico.

Permian Focused Operations

The combined Company will enjoy greater presence in the Permian Basin. The entity will have access to approximately 207,000 barrels per day of Permian sourced crude out of an approximately 300,000 barrel per day crude throughput system, which equates to 69% of the crude slate. This will result in the combined Company being one of the largest buyers of Permian sourced crude among the independent refiners, creating opportunities to benefit from economies of scale in both refining and logistics.

Asphalt and Renewable businesses

The combined Company will have an integrated asphalt business consisting of Alon’s operations primarily in Texas and California/Washington and Delek’s asphalt business primarily in Texas/Arkansas/Oklahoma which generates close to 1.0 million tons of sales on an annual basis.

Value Creating Initiatives

Delek stated that it expects the merged entity to achieve cost synergies of $85 million to $105 million and the deal to add to earnings on a per share basis in 2018.

Stock Performance

On Tuesday, following the announcement, the stock closed the trading session at $25.27, climbing 4.99% from its previous closing price of $24.07. A total volume of 2.02 million shares have exchanged hands, which was higher than the 3-month average volume of 928.33 thousand shares. Delek’s stock price advanced 19.42% in the last month, 49.36% in the past three months, and 99.64% in the previous six months. The stock currently has a market cap of $1.60 billion and has a dividend yield of 2.37%.

Alon USA Energy’s stock closed Tuesday’s trading session at $12.64, surging 11.07% from its previous closing price of $11.38. A total volume of 3.93 million shares have exchanged hands, which was higher than the 3-month average volume of 945.25 thousand shares. The Company’s stock price advanced 30.29% in the last month, 57.28% in the past three months, and 105.59% in the previous six months. The stock currently has a market cap of $933.72 million and has a dividend yield of 4.75%.

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