Acquisition of Orion Refinery

abarrelfullabarrelfull wrote on 11 Apr 2013 11:51
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5/14/2003

Valero Energy Corporation (NYSE:VLO) announced today that the company has executed a purchase agreement to acquire Orion Refining Corporation's 185,000-barrel-per-day (BPD) refinery in Louisiana for $400 million plus approximately $100 million for working capital.

"This acquisition offers tremendous value for our shareholders as the refinery will be a great strategic fit for Valero's refining network," said Bill Greehey, Valero's Chairman of the Board and Chief Executive Officer. "If you just consider the $2 billion investment made in the plant since 1985, we're getting the refinery for only 20 cents on-the-dollar of replacement value."

The sale will be financed with $250 million in cash and the issuance of $250 million of three-year mandatory convertible preferred securities. The majority owners are Credit Suisse First Boston LLC, Trust Company of the West, Jefferies & Company, Inc., and Oaktree Capital Management, LLC. The purchase agreement also calls for a potential earn-out payment if agreed-upon refining margins reach a specified level during any of the next seven years. Any such payment cannot exceed $50 million in a given year or $175 million in the aggregate.

Greehey noted that Valero is well-positioned to make this acquisition. "Our debt-to-capitalization ratio will remain virtually unchanged. At the end of the first quarter, our debt-to-capitalization ratio was just slightly above 41% and when you factor in this acquisition, our debt-to-capitalization ratio will continue to be less than 42%," he said.

The acquisition has been approved by the board of directors of both Valero and Orion. However, because Orion filed for bankruptcy yesterday, the sale also requires the approval of the bankruptcy court. Orion has petitioned the court for an expedited sales process and if granted, the transaction, which has already received FTC approval, is expected to close in late June.


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