Tosco to sell Avon Refinery to Ultramar Diamond Shamrock

Jul 05, 2000 02:00 AM

Tosco announced that it has entered into an agreement to sell its Avon Refinery, located on San Francisco Bay, to Ultramar Diamond Shamrock of San Antonio, Texas. The purchase price of approximately $ 800 mm includes $ 650 mm cash at closing plus a participation payment of up to $ 150 mm, covering the next eight years. Participation payments will be made provided the refining markets generate refining margins above certain defined levels. In addition, Ultramar Diamond Shamrock will also be purchasing crude oil and hydrocarbon inventories associated with the refinery. Tosco will record a modest profit on the sale of the refinery and inventories.
Thomas D. O'Malley, Tosco's Chairman and CEO, said, "Tosco has numerous opportunities to invest the proceeds of this sale, in new facilities and our existing plants, with rates of return above what we expect Avon can deliver for our shareholders. This sale does not alter our long- standing strategy of growth through acquisition. Indeed, it leaves the Company with enhanced financial strength and flexibility. Our goal as always is to grow the earnings per share of Tosco. We will initially reduce our long-term debt by some $ 200 mm and our previous plan to issue additional equity during the third quarter is now being reviewed to determine if it is necessary. We are very pleased to be selling Avon to an experienced refiner who already operates facilities in California. We expect Ultramar Diamond Shamrock will be taking over wholesale fuel sales that have previously been supplied from the Avon Refinery." The Boards of Directors of both companies have approved the transaction. Completion of the sale is subject to the satisfaction of certain conditions, including regulatory approvals. The sale is expected to close prior to year-end.

Tosco, which currently has over $ 20 bn in annualised revenues, is the largest independent refiner and marketer of petroleum products and convenience store merchandise in the United States.

Source: Tosco Corporation
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