Friday May 9, 06:20 PM
Valero deal hints at room for takeovers
By Julie MacIntosh in New York
Valero Energy's deal this week to sell a Louisiana refinery at a lukewarm price highlights the refining industry's margin troubles, but it also signals that financing may be more readily available for deals in the booming energy and commodities
sector than for takeovers within other segments of the economy.Alon, a subsidiary of Alon Israel Oil, has agreed to pay $333m for one of a handful of crude oil refineries Valero has put on the auction block. Valero, one of the world's largest oil refiners, sold the facility at a discount of at least 15 per cent of the valuation that it achieved from the sale of its larger Ohio refinery last year. The valuation is calculated as a unit price based on a refinery's capacity and type of products it handles. Valero and rival Sunoco (NYSE: SUN - news) both announced plans to sell refining assets last year, at a time when rising crude oil input costs had already put their profits under pressure. A spike in crude prices since then has further crushed the notoriously cyclical business' margins, and analysts expect refining assets' sale prices to suffer accordingly. Alon won a $245m term loan from Credit Suisse to finance the acquisition. It also secured a $425m revolving credit facility from Wachovia (NYSE: WB - news) , which can be expanded to $500m, and secured a $50m letter of credit to allow for hedging activity. The company said it would quickly pay down some of that debt. With acquisition financing scarce, the arrangement suggests that dealmaking within the energy and commodities sectors could accelerate this year, according to people within the industries. Uncertainty over commodity prices has infused the market with a level of caution over big deals. But a variety of assets are on the market in small and mid-sized bites that could be easier for buyers and lenders to swallow. Parts of Hunt Petroleum, a privately-owned exploration and production company, and potentially the entire company, remain up for sale, according to people familiar with the process. Corporate buyers and sellers are expected to account for most of the deals. But buy-out investors are also prowling for ways to take advantage of the pricing boom. The Blackstone Group recently teamed up with First Reserve, the energy-focused private equity firm, and Thomas O'Malley, the former chairman of a refiner in which Blackstone (NYSE: BX - news) once invested, to pursue oil refining buy-outs. The partners have contributed a total of $2bn in equity to that venture. Other private equity firms, including Kohlberg Kravis Roberts, have looked closely at energy assets in recent months, according to people within the industry. In one of the year's larger energy-related buy-outs, First Reserve agreed in February to pay $1.5bn for CHC Helicopter (FLY-A.TO - news) , which provides offshore helicopter services. Morgan Stanley (SPU - news) agreed to finance that deal.
Click here for more from FT.com
|
Send Article by Email
