El Paso – Western Refining Inc. said Monday it is buying Giant Industries Inc. for $1.23 billion in cash, creating the fourth- largest publicly traded independent oil refiner in the United States.
News of the deal sent Giant Industries’ shares up $10.43, or 15 percent, to close at $82.22 in trading on the New York Stock Exchange.
The combined company will have the capacity to handle about 216,000 barrels a day from four refineries. That is about 84 percent more than Western’s current capacity.
Western has a refinery in El Paso, where it is based. The deal will give it an East Coast refinery in Yorktown, Va., and two refineries in northern New Mexico.
Giant operates 11 retail gasoline stations in southwestern Colorado that operate under the names Giant, Conoco and Mustang.
In addition to its refineries and Colorado retail stations, Giant Industries, based in Scottsdale, Ariz., owns a crude-oil- gathering pipeline system based in Farmington, N.M., a fleet of crude-oil and finished-product truck transports and a chain of retail service-station and convenience stores in New Mexico and Arizona. It also is the parent company of Phoenix Fuel Co. Inc. and Dial Oil Co., both wholesale petroleum-products distributors.
In a conference call Monday morning, Paul Foster, chief executive of Western Refining, said, “The time is right for this combination of companies.”
“We will maintain the ability to grow and prosper,” Foster said. “We plan to achieve significant efficiencies and at the same time maintain flexibility.”
Foster said the deal, expected to close in the fourth quarter pending customary conditions and regulatory approvals, is likely to save the new company about $20 million annually. But no job losses are expected, he said.
However, a transition team of officials from both companies will review how best to integrate the two companies’ operations and report in from nine to 12 months, he said.
Giant chairman and chief executive Fred Holliger will serve as a special adviser to the Western board.
Foster said his company approached Giant about an acquisition early this summer.
Worldwide consumption of refined oil products continues to increase without any indication of abating, he said. Western wanted to expand its refining activities, and “we’ve known their management and their company for many years,” Foster said of Giant.
The purchase will mean the loss of Western’s small-refinery status, but Foster said the status change is not significant given that the company was nearing the end of the regulating period.
The acquisition also will bring retail operations that Western does not have, he said.
“It’s a complementary business for us,” he said.
Under the terms of the deal, Western Refining will pay $83 a share for Giant. That represents a 16 percent premium over Giant’s share price of $71.79 at the close of trading Friday.
Western Refining will also assume $275 million in debt.
Shares of the company fell 85 cents, or 3.3 percent, to close at $25.14 on the New York Stock Exchange.
Western expects Giant to add to cash flow and per-share earnings immediately following closing.
Western plans to finance the deal with $250 million in existing cash and a $2 billion loan from Bank of America.
The company is keeping its headquarters in El Paso.
Denver Post staff writer Steve Raabe contributed to this report.
