Northern Tier & Western Refining Announce Merger

EL PASO, Texas and TEMPE, Ariz. — Western Refining Inc. will acquire all outstanding common units of Northern Tier Energy LP it does not already own, under a definitive merger agreement announced Tuesday.

Jeff Stevens, president and CEO of El Paso-based Western Refining, reported during a conference call that the deal will definitely close in the first half of 2016. When asked for more specific timing, he said he expects the deal to close late in 2016’s first quarter, but noted the deal is subject to waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act, as well as a Northern Tier unitholder vote.

Northern Tier unitholders will receive $15 per unit held, as well as 0.2986 of a share of Western Refining.

Western Refining already owns 38 percent of the common units and 100 percent of the general partnership interest in Northern Tier. Of course, Western Refining stated in a news release Tuesday that it will cast all of its owned Northern Tier units in favor of the transaction, making it very likely to be approved by unitholders.

Upon closing, Tempe-based Northern Tier unitholders will own 15 percent of Western Refining.

“We are very excited about the transaction,” Stevens said during the conference call. “It will be immediately accretive to EPS [earnings per share].”

The merger will combine approximately 395 convenience stores — 165 of which are operated by Northern Tier in the Midwest primarily under the SuperAmerica brand name and Western Refining's 230 Giant, Mustang, Sundial and Howdy’s stores operated in the Southwest. Northern Tier also supports 99 franchised locations primarily in Minnesota and Wisconsin under the SuperAmerica LLC trademark.

Neither Stevens nor Northern Tier President and CEO Dave Lamp discussed the c-store assets during the conference call other than to say they will operate as an “integrated retail network.”

Stevens did comment on why the merger makes a lot of sense. “It simplifies our corporate structure with a greater geographic footprint and earnings diversification,” he said, adding that the combined company will also operate three “top-tier refineries” and the merger will allow the company to realize $10 million in annual synergies.

On Norther Tier’s end, Lamp said the transaction will allow the combined company to grow significantly, and it is a great way to reward Northern Tier unitholders.

“We’ve had an outstanding year, but it is not reflected in the unit price,” said Lamp, citing the fact that Northern Tier’s unit price has not risen recently due to Wall Street investors punishing all master limited partnerships (MLPs) in large part due to lower oil prices.

Hence, Stevens noted the combined company will operate under a “C” corporate structure, as opposed to Northern Tier’s MLP corporate structure.

Upon completion of the transaction, Stevens will remain CEO and Paul Foster will remain executive chairman of Western Refining. Lamp will be president and chief operating officer of the newly merged company.

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