Delek US Holdings said this week it would buy a 48% holding in Alon USA Energy from Israel’s Alon Group for about $572 million in cash and stock, giving it a stake in hundreds of gasoline stations and convenience stores and three oil refineries in the United States.
Delek US, which used to be part of Israeli billionaire Yitzhak Tshuva’s Delek Group, said late Tuesday it would buy 33.7 million Alon USA shares for the equivalent of $16.985 each, a premium of more than 8% over the stock’s Tuesday close.
Alon USA stock was up 0.5% at $15.78 in New York on Wednesday while Delek’s shares rose 3.7% to $39.30.
With its refineries in Texas, California and Louisiana, Alon USA will complement Delek’s refinery operations in Tyler, Texas and El Dorado, Arkansas. Alon USA also operates nearly 300 7-Eleven convenience stores in central and western Texas and New Mexico, adding to Delek’s chain of 365 company-operated convenience stores.
“We are excited about this opportunity to invest in Alon USA as it broadens our asset diversity while offering future growth opportunities,” said Delek US CEO Uzi Yemin said. “We look forward to working with Alon USA’s Board of Directors and management team to create further value together in the future.”
For the seller, Israeli holding company Alon Group, the sale will give it badly needed cash. Apart from Alon USA, its holdings include a chain of filling stations and a retail group in Israel, led by the ailing Mega chain of supermarkets. Proceeds from the sale will help Alon Group to repay some 2.2 billion shekels ($550 million) owed Series Aleph bondholders. Alon Group, which saw its long-serving CEO David Wiessman step down earlier this year, owes another 450 million shekels to Bank Hapoalim.
Delek said it would pay $200 million of the sum in cash and 6 million shares, and issue Alon Israel an unsecured $145 million promissory note maturing in January 2021. The deal is expected to close in the second half of May.
For a year after that, Delek can acquire up to 49.99% of Alon USA at its discretion and boost its stake above that threshold only with the approval of Alon USA’s board. The company’s restrictions on ownership of Alon USA stock ends a year after the deal closes, Delek said.
Bank of America Merrill Lynch and Barclays acted as Delek's financial advisers in the deal.