Valero Energy Corp. plans to acquire Premcor Inc. create the largest refiner of crude oil in North America

Monday, April 25th 2005, 8:40 am

By: News On 6

SAN ANTONIO (AP) _ Valero Energy Corp. plans to acquire Premcor Inc. for $6.9 billion in cash and stock as part of a deal that would create the largest refiner of crude oil in North America, company officials announced Monday.

In the merger agreement, Valero will issue $3.5 billion in stock and pay $3.4 billion in cash. Valero also will assume about $1.8 billion in Premcor debt and will add four refineries and 790,000 barrels per day to its system.

``This transaction is one of the largest and most strategic acquisitions in Valero's history,'' said Bill Greehey, Valero chairman and chief executive officer. ``This acquisition is also good news for consumers because we have a track record of investing in and expanding our refineries.''

With the proposed acquisition, Valero will have total assets of $25 billion and annual revenues of nearly $70 billion, which would rank it No. 15 on the current listing of the Fortune 500.

Adding Premcor's refineries in Port Arthur, Texas; Memphis, Tenn.,; Delaware City, Del.; and Lima, Ohio; will give San Antonio-based Valero 19 refineries with a total throughput capacity of 3.3 million barrels per day.

The boards of directors of both companies unanimously approved the acquisition, which is subject to the approval of Premcor's shareholders and customary regulatory approvals. The transaction is expected to close Dec. 31.

``This transaction provides Premcor's shareholders with a meaningful increase in the value of their investment, as the terms of the agreement represent a 24.6 percent increase over the closing price of our stock on April 22,'' said Jefferson F. Allen, Premcor's chief executive officer.

Premcor, of Old Greenwich, Conn., is one of the largest independent petroleum refiners and suppliers of unbranded transportation fuels, heating oil, petrochemical feedstocks, petroleum coke and other petroleum products in the United States. The company's refineries have a combined crude oil throughput capacity of approximately 790,000 barrels per day.

In recent months, U.S. refiners have seen rising demand spur gains in fuel prices and higher profits. Gas prices were expected to dominate talks Monday between President Bush and Saudi Arabia's Crown Prince Abdullah in Texas.

``This acquisition couldn't come at a better time,'' Greehey said. ``2005 is off to a great start and we are right on track to have another record year. Our first quarter earnings were 111 percent higher than the same period last year, and of course, we had a record first quarter in 2004.''