$8 billion merger creates refining giant

Valero Energy today became the largest oil refiner in North America after acquiring Premcor for $8 billion.

Valero Energy and Premcor announced today that the companies have executed a merger agreement for Valero to acquire Premcor in an $8 billion transaction. As a result, Valero will add four refineries and 790,000 barrels per day (BPD) of throughput capacity to its system, making it the largest oil refiner in North America.

With this acquisition, Valero will have total assets of $25 billion and annual revenues of nearly $70 billion. Adding Premcor’s refineries in Port Arthur, Texas; Memphis, Tennessee; Delaware City, Delaware; and Lima, Ohio will give Valero 19 refineries with a total throughput capacity of 3.3 million BPD.

“This transaction is one of the largest and most strategic acquisitions in Valero’s history,” said Bill Greehey, Valero chairman and chief executive officer. “We are acquiring several very strategic refineries for significantly less than their combined replacement value, and we’ll be improving the profitability of these plants by improving their reliability and yields, and increasing their capacities.

The equity portion of the $8 billion transaction will be paid 50 percent in stock and 50 percent in cash. At closing, Premcor shareholders will receive 46.7 million shares of Valero stock, valued at approximately $3.5 billion as of April 22, 2005. In addition, Valero will assume an estimated $1.8 billion of Premcor’s existing long-term debt.

Under the terms of the merger agreement, Premcor shareholders will have the right to receive either 0.99 shares of Valero common stock, or $72.76 in cash for each share of Premcor stock they own, or a combination of the two.

The boards of directors of both companies unanimously approved Valero’s acquisition of Premcor, which is subject to the approval of Premcor’s shareholders and customary regulatory approvals. The transaction is expected to close December 31, 2005. There will be no changes to Valero’s senior management or board of directors.