By the OGJ Online Staff
HOUSTON, May 10 -- Valero Energy Corp. expects expanded market depth and improved earnings stability upon completion of its acquisition of Ultramar Diamond Shamrock for $6 billion, Valero CEO Bill Greehey told shareholders Thursday.
"Valero's complex refining system coupled with UDS' extensive refining, logistics, and retail network really gives us a more balanced asset portfolio," Greehey said. "UDS brings us an outstanding retail network with excellent leadership and strategic vision."
Upon completion of the merger, Greehey said Valero would gain a retail marketing business, "making Valero a true refining and marketing major."
The resulting combined company would have 13 refineries and 23,000 employees in the US and Canada. Valero would become one of the nation's largest retailers. Both companies are based in San Antonio (OGJ Online, May 7, 2001).
With the pending acquisition, Valero is expected to have revenues of $32 billion/year and total assets of more than $10 billion. It also will become one of the top four marketers in the country, Greehey said.
"Retail fuel margins tend to be counter-cyclical to refining margins as retail street prices are slow to react to both upward and downward changes in the wholesale gasoline and diesel prices that drive refining margins," Greehey said.
When wholesale values are strong, then retail margins tend to get squeezed but when the wholesale values weaken, then retail margins widen, he said.
"The counter balance that the retail network provides to the combined company will help stabilize earnings and operational cash flows over the entire business cycle," he said.
The merger also should create higher stock value, Greehey predicted, adding he hopes the deal will close by Oct. 31.
"With the financial capacity we'll have, we fully intend to expand our business, grow the company and continue to deliver value to our shareholders," he said.
