Tesoro closed a definitive agreement to acquire Western Refining at an implied current price of $37.30 per Western share in a stock transaction, representing an equity value of $4.1 billion based on Tesoro’s closing stock price of $85.74 on November 16, 2016. This represents an enterprise value of $6.4 billion, including the assumption of approximately $1.7 billion of Western’s net debt and the $605 million market value of non-controlling interest in Western Refining Logistics.
To support the transaction, Tesoro entered into a financing commitment letter with Goldman Sachs Bank and Goldman Sachs Lending Partners, together with GS Bank, providing commitments with respect to debt financing to be utilized in connection with funding the merger.
The company entered into an amended and restated commitment letter with GS Bank, JPMorgan Chase Bank, Mizuho Bank, The Bank of Tokyo-Mitsubishi UFJ, Wells Fargo Bank, Wells Fargo Securities, WF Investment Holdings, SunTrust Bank, SunTrust Robinson Humphrey, UBS AG, Stamford Branch and UBS Securities which replaced the original commitment letter.
Subject to the terms and conditions set forth in the commitment letter, the parties have committed to provide a 364-day senior unsecured bridge facility in an aggregate principal amount not to exceed $2.15 billion and to the extent certain proposed amendments to the company’s existing credit facility are not obtained, a senior secured backstop credit facility in an aggregate principal amount up to $2 billion for purposes of refinancing the existing credit facility. The terms and conditions of the bridge facility and the backstop facility are substantially the same as in the original commitment letter.
“The acquisition of Western further strengthens our integrated business model and extends our portfolio into attractive and growing markets,” said Greg Goff, chairman and CEO of Tesoro. “As a leading integrated refining, marketing and logistics company, this transformative acquisition drives value through a combination of access to advantaged crude oil, a strong, multi-brand marketing and convenience store portfolio and a robust platform for logistics growth, all of which will allow us to continue to create shareholder value.”
Upon closing, Goff will continue to serve as chairman, president and CEO of the combined company. Steven Sterin will continue to serve as EVP and CFO. The headquarters of Tesoro will remain in San Antonio, TX.
Goldman, Sachs is serving as exclusive financial advisor to Tesoro and certain of its affiliates are providing committed financing. Sullivan & Cromwell is serving as Tesoro’s legal advisor for the transaction. Barclays is serving as exclusive financial advisor to Western, and Davis Polk & Wardwell is serving as its legal advisor.
Tesoro Corporation is an independent refiner and marketer of petroleum products.