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Delek US May Acquire All of Alon USA

BRENTWOOD, Tenn. — Delek US Holdings Inc.'s agreement with Alon Israel Oil to acquire approximately 48 percent of the outstanding shares of Alon USA Energy Inc. will close as early as May 12, and the company will "think seriously" about purchasing the remainder of Alon USA in the near future, Uzi Yemin, Delek US' chairman, president and CEO, said Wednesday during its 2015 first-quarter earnings call.

"When the markets are right, we will look at this seriously," Yemin noted, regarding the timing of when Delek US might purchase Alon USA outright. "…We need to do our due diligence first."

On April 14, Delek US agreed to acquire 33.7 million outstanding shares of Alon USA, the largest 7-Eleven licensee in the United States. According to Yemin, Alon USA's logistics and retail assets fit in well with its asset mix.

The transaction already received U.S. antitrust clearance under the Hart-Scott-Rodino Act, allowing the deal to close quickly.

"With this transaction, we are doubling the size of our company," Yemin said. "Our goal is to do so every five years."

As for why Delek US did not simply purchase all of Alon USA in April, the chief executive revealed: "Alon didn’t want a full merger because it wanted the deal to close as quickly as possible. Considering we announced the deal only two weeks ago and it could close next week, I think that was [accomplished]."

Yemin recounted that he first received a call from Alon about a possible transaction during the Super Bowl on Feb. 2. "I thought I scored a touchdown," he said. 

Under the terms of the transaction, Yemin will become chairman of Alon USA's board of directors. Four other Delek US execs will also join the board.

"We are looking forward to working with Alon USA's board in the future," the Delek US chief relayed.


Delek US' retail division, comprised of 360 convenience stores under the MAPCO Express, MAPCO Mart, East Coast, Fast Food and Fuel, Favorite Markets, Delta Express and Discount Food Mart banners, had a strong 2015 fiscal first quarter.

For the three-month period ended March 31, Delek US' retail operations saw contribution margins more than double year over year to $12.3 million.

Fuel gallons sold increased 6 percent year over year to 108.65 million gallons, while fuel margins increased by nearly 4 cents per gallon to 16.3 cents per gallon.

In-store merchandise sales were also solid, increasing 3.5 percent to $94.5 million for the latest quarter. Merchandise margins dropped slightly to 28.1 percent.

Yemin cited MAPCO's loyalty program, as well as maturation of its 64 large-format "mega stores" as reasons for the robust retail division results.

"We had great retail growth," he said. "People are driving more and I see a great summer ahead for us."

In fact, the company is so impressed with the in-store results at its "mega stores" that Delek US will continue to build more of these sites, according to Yemin, and will even consider expanding upon its Southeast operating region.

"The [c-store] industry is changing," the CEO stated. "[Retailers] need to look to build large-format stores."

Companywide, Brentwood-based Delek US Holdings reported a first-quarter net loss of $16.1 million, compared to a profit of $33.7 million in its 2014 first quarter. Unrealized hedging losses, inventory costs and professional fees were cited as the reasons for the overall loss.

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