Valero buys Ultramar Diamond Shamrock

May 07, 2001 02:00 AM

Valero Energy is buying rival Ultramar Diamond Shamrock in a $ 4 bn cash and stock deal that would create the nation's second-largest oil refiner. Once the deal announced is completed, San Antonio-based Valero would have $ 32 bn in annual revenue, 23,000 employees, 13 refineries and more than 5,000 retail outlets. Valero said it would trail only Irving-based ExxonMobil in refining capacity in the United States.
Executives of both Valero and Ultramar, also based in San Antonio, said no layoffs were planned but that some employees would be offered early-retirement incentives. "We're taking two of the best independent refining and marketing companies and really becoming the premier US refining and marketing company," Valero Chairman and CEO Bill Greehey told analysts.

Valero would add seven refineries with a combined capacity of 850,000 bpd of oil. Valero would also expand its presence in Texas and California and expand into Colorado, Oklahoma and Quebec, Canada, Greehey said. Both companies' boards of directors have approved the deal, which still needs approval from both companies' shareholders and from federal regulators.
Valero would exchange 1.228 shares of its common stock for about half of the outstanding shares of Ultramar Diamond Shamrock common stock and pay $ 55 cash a share for the remaining shares. That would represent a 29 % premium over Ultramar's closing price of $ 42.71 per share.

Ultramar Chairman and CEO Jean Gaulin said the market had undervalued his company's stock and said Valero's offer of a "substantial premium" over the closing price better reflects Ultramar's real value.
"We don't plan on any layoffs as a result of this transaction," Gaulin said. "There will be a role for everybody. This is going to be a large company. We are going to need all the employees going forward." Gaulin said besides an early-retirement offer, some Ultramar executives who have lucrative severance packages in their contracts -- including himself -- might use them.
A Valero news release said Gaulin would stay with Ultramar until the sale closes, then retire. Greehey would remain chairman and CEO. Valero has about 3,100 employees and 2000 revenues of nearly $ 15 bn. The company currently owns and operates six refineries in Texas, Louisiana, New Jersey and California with a combined capacity of more than 1 mm bpd.

Ultramar has about $ 17 bn in annual revenues and more than 20,000 employees. It has nearly 5,000 branded gasoline and convenience stores, most of which are named Diamond Shamrock, Ultramar, Beacon or Total.

Source: AP
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