Tesoro, Valero renegotiate refinery deal

by The Associated Press

Tesoro Petroleum Corp. has renegotiated the price it will pay Valero Energy Corp. for a refinery and 70 service stations in California, and the deal will close this month, the companies said May 6.

The San Antonio-based oil companies said they agreed to trim Tesoro’s purchase price by $50 million, to $1.075 billion, and defer payment of $150 million.

The amended agreement has been approved by the California attorney general and is subject to review by the Federal Trade Commission, the companies said.

“Obviously, we were disappointed that the transaction did not go through as originally outlined, but the revised terms of the transaction are still very favorable for all parties and an expedited close is also in the best interest of all parties,” said Valero chairman and CEO Bill Greehey.

Tesoro’s original refinery is in Nikiski. The company has added four more since — in Hawaii, Washington state, Utah and North Dakota.

Tesoro chief executive Bruce A. Smith stunned Valero executives and analysts last week when he announced — during a conference call to discuss the company’s first-quarter loss — that Tesoro might back away from the refinery purchase.

The comment sent Tesoro’s stock down 30 percent May 2, although it rebounded by 17 percent May 3.

News of the renegotiated deal lifted Tesoro shares 52 cents, or 6.1 percent, to $9 in late trading May 6, but it sent Valero shares down $1.36, 3.2 percent, to $41.63.

The sale of the Golden Eagle refinery in Martinez, Calif., near San Francisco, is expected to close May 17. But it could close sooner depending on Tesoro’s receipt of final documentation of a change in its credit facility as well as other factors, the company said.

Federal regulators required Valero to sell the refinery and service stations as a condition of approving its acquisition of Ultramar Diamond Shamrock Corp. last year.

Part of Tesoro’s purchase price would be deferred in the form of two 10-year notes.

A $100 million promissory note would include a zero coupon for the first five years and an interest rate of 7.5 percent after that. A $50 million note would be interest-free for the first year and carry rates of 7.47 percent to 7.5 percent after that.