Delek US & Alon USA Eye July 1 Merger Closing

BRENTWOOD, Tenn. — Delek US Holdings Inc. could be full owner of Alon USA Energy Inc. in less than two months.

The company is making progress toward its acquisition of the remaining stock of Alon it does not already own, according to Assi Ginzburg, Delek's chief financial officer. 

"We received clearance from the FTC [Federal Trade Commission] in early April. And we expect to close this transaction on July 1, subject to approval of both Alon and Delek shareholders," Ginzburg reported during Delek's first-quarter earnings call May 8.

In January, Delek reached a definitive agreement to acquire the remaining 53 percent of Alon shares of common stock it does not already own. The all-stock transaction carries an equity value of $464 million, as CSNews Online previously reported.

During Alon USA Energy's first-quarter earnings call, held May 9, CEO Alan Moret said the company could not comment further or take questions on the pending transaction. 

"We continue to believe the economies of scale, financial strength and synergies generated through this merger create the opportunity to drive long-term value for shareholders," Moret remarked.

DELEK'S Q1 FINANCIALS

Delek US reported net income of $11.2 million for the first quarter of 2017, compared to a net loss of $29.2 million for the same quarter in 2016. The change was driven primarily by increases in Delek's refining segment — with a contribution margin of $64.4 million, compared to $23.5 million in the first quarter of 2016.

In addition, Delek's income from its current equity investment in Alon was $2.8 million in the first quarter of 2017, compared to a loss of $17.8 million in the first quarter of 2016, according to the company. 

Brentwood-based Delek US Holdings is a diversified downstream energy company with assets in petroleum refining and logistics. The refining segment consists of refineries operated in Tyler, Texas and El Dorado, Ark.

The company sold its retail holdings, MAPCO Express Inc. and certain related affiliated companies, to a U.S. subsidiary of Compañía de Petróleos de Chile COPEC S.A. (COPEC) in November. The deal was worth $535 million plus MAPCO's estimated cash on hand and working capital adjustment, totaling approximately $16.3 million. 

Delek's pending acquisition of Alon will give it another foothold in the convenience channel. Alon is the largest 7-Eleven licensee in the United States and operates approximately 300 convenience stores that also market motor fuels in Central and West Texas and New Mexico.

ALON'S Q1 FINANCIALS

"We are very pleased with our operational performance and our strong start to the year," Moret said during Tuesday's call. 

For the first quarter of 2017, Alon reported net income available to stockholders of $7.3 million, compared to net loss available to stockholders of $35.5 million for the same period last year. Excluding special items, Alon recorded net income available to stockholders of $8.8 million, compared to net loss available to stockholders of $29.2 million for the year-ago period. Adjusted EBITDA for the quarter was $64 million. 

Alon's retail business saw strong fuel sales during the quarter, with absolute sales volumes up 6.2 percent vs. the first quarter of 2016. "This is particularly impressive given that we had five fewer stores in the first quarter of 2017," Moret noted.

On a same-store basis, fuel sales volumes were up nearly 7 percent in the quarter. Merchandise sales were down 1 percent on a same-store basis year over year. as growth in Alon's stores outside of the Permian Basin did not fully offset the decline in same-store sales at those locations.

"We did see overall improvement late in the quarter, however, as sales in March exceeded those in March 2016," Moret said. "We are encouraged by the rising retail and increased oil field activity in the Permian Basin. We believe our retail stores are well positioned to benefit as the West Texas economy expands."