BRENTWOOD, Tenn., Mar 21, 2011 (BUSINESS WIRE) --
Delek US Holdings, Inc. (NYSE: DK), a diversified energy company with
assets in the petroleum refining, marketing and retail industries, today
announced that the Company has signed a definitive agreement to acquire
the majority equity interest in Lion Oil Company ("Lion Oil") currently
held by Ergon, Inc. ("Ergon").
In 2007, Delek US acquired a 34.6 percent minority interest in Lion Oil
from multiple selling shareholders. At the close of the proposed
transaction, Delek US will own an additional 53.7 percent equity
interest in Lion Oil, bringing Delek US' total equity ownership in Lion
Oil to 88.3 percent. Upon becoming the new majority shareholder, Delek
US will assume operational control and management of the Lion Oil
refinery and certain related assets.
Lion Oil owns and operates an 80,000 barrel per day, 9.0 complexity
refinery located in El Dorado, Arkansas; the 80-mile Magnolia-El Dorado
crude oil transportation system that runs between Shreveport, Louisiana
and the Magnolia crude terminal (west of the El Dorado refinery); the
28-mile El Dorado crude oil transportation system that runs from the
Magnolia terminal to the El Dorado refinery, as well as two associated
product pipelines; a crude oil gathering system with more than 800 miles
of pipeline; and three light product distribution terminals located in
Memphis and Nashville, Tennessee and El Dorado, Arkansas. Lion Oil also
owns and operates an asphalt distribution terminal located in El Dorado,
Delek US has agreed to acquire Ergon's equity interest in Lion Oil for a
combination of cash, stock and the payment or replacement of all debt
currently owed by Lion to Ergon, including the following: (a) Delek US
will issue restricted shares of common stock to Ergon valued at
approximately $45 million (determined by the average closing price of
Delek US' common stock for the ten consecutive trading days immediately
preceding the closing date); (b) Lion Oil and/or Delek US will make a
cash payment of $50 million to Ergon; (c) Lion Oil will execute a new
$50 million term note payable to Ergon that will be guaranteed by Delek
US; and (d) Lion Oil will divest certain assets to Ergon.
In addition, Delek US has agreed to assist Lion Oil in obtaining
third-party financing of working capital previously provided by Ergon.
"This transaction represents a significant expansion of our downstream
asset base throughout the Gulf Coast and Mid-Continent regions. Upon
becoming the new majority owner and operator of Lion Oil, we will be
well-positioned to participate at each level of an integrated supply
chain that includes the production, wholesale distribution and retail
marketing of refined products in the region," stated Uzi Yemin,
President and Chief Executive Officer of Delek US Holdings.
"The addition of the El Dorado refinery will more than double our total
production capacity. The El Dorado refinery's location affords it access
to a variety of local, domestic offshore and foreign crudes. Over time,
we believe we will be able to source and process an increased quantity
of cost advantaged crudes at El Dorado, representing a clear economic
opportunity for us," continued Yemin.
The El Dorado refinery is currently able to produce low sulfur gasoline
and ultra low-sulfur diesel products, in compliance with existing clean
fuels requirements. The refinery completed a turnaround in late 2009,
with the next turnaround currently scheduled for 2014.
Yemin continued: "From a strategic perspective, we believe this
transaction will further our goal of being a vertically integrated
company and will diversify our exposure beyond a single refining asset.
Given that the El Dorado refinery has the ability to supply light
products to portions of our convenience store network in Tennessee and
Arkansas we will, for the first time in our history, own and operate a
refinery capable of supplying our retail stores in neighboring markets."
"This transaction will also significantly expand our wholesale
distribution network in multiple new markets throughout the
Mid-Continent region. From El Dorado, we will have the ability to market
products to owned and third-party terminals with access to a major
product pipeline system which runs from the Gulf Coast into the
Midwestern United States," stated Yemin.
"Our management of an integrated supply chain will help to mitigate
supply risks while optimizing distribution synergies across our
downstream asset base, thereby positioning us to expand our competitive
reach," continued Yemin.
"With the continued support of our Israeli relationship banks and our
majority shareholder, Delek Group, we are in the process of securing
long-term financing for this transaction. Moreover, as a result of our
ongoing financing efforts and increasing free cash flow from current
operations, we anticipate Delek US will have improved liquidity at the
close of this transaction, when compared to year-end 2010," stated Yemin.
"We look forward to partnering with the employees of Lion Oil and the
community of El Dorado. We remain committed to operating all of our
businesses in a safe, reliable and environmentally sound manner that
will grow value for our shareholders, while providing economic benefits
to the employees and customers in the areas that we serve," noted Yemin.
The transaction is expected to close during the second quarter 2011,
subject to the completion of financing arrangements and the satisfaction
of customary closing conditions. Upon closing, Delek US will discontinue
use of the cost method of accounting for its investment in Lion Oil, and
Lion Oil will be treated as a consolidated subsidiary of Delek US.
The Company will hold a conference call today, March 21, 2011 at 10:00
a.m. Central Time, to discuss this transaction. Investors will have the
opportunity to listen to the conference call via live webcast by going
and clicking on the 'Investors' tab. For those who cannot listen to the
live broadcast, a telephonic replay will be available through April 4,
2011 by dialing 800-642-1687. An archived version of the replay will
also be available on Delek US' website for 90 days.
A series of presentation slides will accompany the conference call and
webcast. These slides may be accessed on the Delek US Holdings website
by selecting the 'Investors' tab prior to the start of the event.
About Delek US Holdings, Inc.
Delek US Holdings, Inc. is a diversified energy business focused on
petroleum refining, marketing and supply of refined products, and retail
marketing of fuel and general merchandise. The refining segment operates
a high conversion, independent refinery, with a design crude
distillation capacity of 60,000 barrels per day, in Tyler, Texas. The
marketing and supply segment markets refined products through its
terminals in Abilene, Texas and San Angelo, Texas as well as other third
party terminals. The retail segment markets gasoline, diesel and other
refined petroleum products and convenience merchandise through a network
of company-operated retail fuel and convenience stores, operated under
the MAPCO Express(R), MAPCO Mart(R), East Coast(R), Discount Food Mart(TM), Fast
Food and Fuel(TM) and Favorite Markets(R) brand names.
Safe Harbor Provisions Regarding Forward-Looking Statements
This press release contains forward-looking statements that are based
upon current expectations and involve a number of risks and
uncertainties. Statements concerning our current estimates, expectations
and projections about our future results, performance, prospects and
opportunities and other statements, concerns, or matters that are not
historical facts are "forward-looking statements," as that term is
defined under the federal securities laws.
Investors are cautioned that the following important factors, among
others, may affect these forward-looking statements. These factors
include but are not limited to: our ability to complete the Lion Oil
transaction; management's ability to execute its strategy of growth
through acquisitions and transactional risks in acquisitions; our
competitive position and the effects of competition; the projected
growth of the industry in which we operate; changes in the scope, costs,
and/or timing of capital projects; losses from derivative instruments;
general economic and business conditions, particularly levels of
spending relating to travel and tourism or conditions affecting the
southeastern United States; risks and uncertainties with the respect to
the quantities and costs of crude oil, the costs to acquire feedstocks
and the price of the refined petroleum products we ultimately sell;
potential conflicts of interest between our majority stockholder and
other stockholders; and other risks contained in our filings with the
Securities and Exchange Commission.
Forward-looking statements should not be read as a guarantee of future
performance or results and will not be accurate indications of the times
at, or by which such performance or results will be achieved.
Forward-looking information is based on information available at the
time and/or management's good faith belief with respect to future
events, and is subject to risks and uncertainties that could cause
actual performance or results to differ materially from those expressed
in the statements. Delek US undertakes no obligation to update or revise
any such forward-looking statements.
SOURCE: Delek US Holdings, Inc
Delek US Holdings, Inc.
U.S. Investor / Media Relations Contact:
Noel Ryan III, 615-435-1356
Director - Head of Investor Relations & Corporate Communications