Tesoro again revises terms of Golden Eagle refinery acquisition

Tesoro Petroleum Corp. again amended terms for its purchase of Valero Energy Corp.'s 168,000 b/d Golden Eagle refinery and 70 related retail sites in northern California. Tesoro will pay a total of $1.075 billion and delay the payment of $150 million of the acquisition price in the form of two 10-year notes. Earlier this year, San Antonio-based Tesoro had announced amended terms for the refinery purchase, saying it would pay a total of $1.25 billion (OGJ, Mar. 4, 2002, p. 30).

May 8, 2002

2 min read

By OGJ editors
HOUSTON, May 8 -- Tesoro Petroleum Corp. again amended terms for its purchase of Valero Energy Corp.'s 168,000 b/d Golden Eagle refinery and 70 related retail sites in northern California. Tesoro will pay a total of $1.075 billion and delay the payment of $150 million of the acquisition price in the form of two 10-year notes. Earlier this year, San Antonio-based Tesoro had announced amended terms for the refinery purchase, saying it would pay a total of $1.25 billion (OGJ, Mar. 4, 2002, p. 30). Originally, Tesoro agreed to buy the plant for $945 million plus the value of feedstock and refined product inventory at closing, estimated at $130 million (OGJ, Feb. 11, 2002, p. 36).

In addition, Valero has agreed to expend through closing $47.5 million of the $122 million CARB (California Air Resources Board fuel standards) Phase III project at the refinery. Previously, Valero had estimated its total capital investment for this project at $22 million.

"The revised terms of the transaction reflect the current margin environment and our principal goal to preserve maximum financial flexibility and meet the pro forma capital requirements of the company. . .in a below-average margin environment," said Bruce Smith, chairman, president and CEO of Tesoro.

"Obviously, we were disappointed that the transaction did not go through as originally outlined," said Valero Chairman and CEO Bill Greehey, "but the revised terms of the transaction are still very favorable for all parties, and an expedited close is also in the best interest of all parties."

Valero's divestiture of the Golden Eagle plant and other retail assets was mandated by the consent order executed last year between the company and the Federal Trade Commission and by comparable orders executed with California and Oregon as a condition of Valero's completed merger with Ultramar Diamond Shamrock Corp., San Antonio (OGJ Online, Jan. 2, 2002).

The deal, which has met the approval of California's attorney general, is expected to close May 17. The FTC is reviewing the transaction's terms.