Delek US Holdings To Buy Remaining Shares Of Alon USA

(RTTNews) - Delek US Holdings Inc. (DK) and Alon USA Energy, Inc. (ALJ) announced a definitive agreement by which Delek US will acquire all of the outstanding shares of Alon common stock which Delek US does not already own in an all-stock transaction.

Based on a closing price of $24.07 per share for Delek US common stock on December 30, 2016, the implied price for Alon common stock is $12.13 per share, or $464 million in equity value for the remaining shares. The enterprise value of this transaction to acquire the remaining 53 percent of Alon shares of common stock not already owned by Delek US is approximately $675 million including the proportionate assumption of $152 million of net debt related to this transaction and $59 million of market value for the non-controlling interest in Alon USA Partners, LP (ALDW).

The transaction was unanimously approved by the Special Committee of Alon's board of directors and by the board of directors of Delek US. Additionally, the board of directors of Alon approved the transaction, excluding Delek employed directors which abstained from voting on this matter.

Delek US currently owns approximately 33.7 million shares of common stock of Alon.

As per terms of the agreement, the owners of the remaining outstanding shares in Alon that Delek US does not currently own will receive a fixed exchange ratio of 0.5040 Delek US shares for each share of Alon. This represents a 5.6 percent premium to the 20 trading day volume weighted average ratio through and including December 30, 2016, of 0.477. Upon closing, the combined company will be primarily led by Delek US' management team.

In conjunction with the Merger Agreement, the Special Committee of Alon's board of directors will nominate one new director that will be appointed to the Delek US board, and one new director that will be added to the board of Delek Logistics Partners LP's (DKL) general partner. Concurrently with the execution of the Merger Agreement, Delek US entered into three separate voting agreements with Alon USA, David Wiessman and Jeff Morris, pursuant to which each of Delek US, Mr. Wiessman and Mr. Morris have agreed to vote their shares of Alon in favor of this transaction.

The transaction is expected to close in the first half of 2017 and is subject to customary closing conditions, including regulatory approval and approval by a majority of votes cast of Delek US shareholders and approval by the holders of a majority of the remaining 53 percent of Alon shares, which excludes the 47 percent of Alon shares owned by Delek US.

The Synergies on a combined base of an estimated $85 million to $105 million is expected to be achieved in 2018. The annual run rate is expected to be achieved in 2018, the first full year of operation following the closing of the transaction.

This transaction is expected to be highly accretive in 2018 on an earnings per share basis, the first full year of operation of the combined company, assuming a benefit from $95.0 million of synergies. By benefitting from Delek US' strong financial position, a focus after closing will be to reduce the financing cost of the combined company. Delek US' share repurchase program, which expired on December 31, 2016, has been replaced with a new $150 million repurchase authorization, which does not have an expiration date.