Item 1.01. Entry into a Material Definitive Agreement.
On January 2, 2017, Alon USA Energy, Inc., a Delaware corporation ( “Alon”), Delek US Holdings, Inc., a Delaware corporation (“Delek”), Delek Holdco, Inc., a Delaware corporation and a wholly owned subsidiary of Delek (“HoldCo”), Dione Mergeco, Inc., a Delaware corporation and a wholly owned subsidiary of HoldCo (“Parent Merger Sub”) and Astro Mergeco, Inc., a Delaware corporation and wholly owned subsidiary of HoldCo (“Astro Merger Sub” and, together with Holdco and Parent Merger Sub, the “Holdco Parties”) entered into an Agreement and Plan of Merger (the “Merger Agreement”) pursuant to which (i) Parent Merger Sub will, upon the terms and subject to the conditions thereof, merge with and into Delek (the “Parent Merger”), with Delek surviving as a wholly owned subsidiary of Holdco and (ii) Astro Merger Sub will, upon the terms and subject to the conditions thereof, merge with and into Alon (the “Astro Merger” and, together with the Parent Merger, the “Mergers”) with Alon surviving.
In the Parent Merger, each issued and outstanding share of common stock of Delek, par value $0.01 per share (“Delek Common Stock”), or fraction thereof, will be converted into the right to receive one validly issued, fully paid and non-assessable share of Holdco common stock, par value $0.01 per share (“New Common Stock”) or such fraction thereof equal to the fractional share of Delek Common Stock, upon the terms and subject to the conditions set forth in the Merger Agreement.
In the Astro Merger, each issued and outstanding share of common stock of Alon, par value $0.01 per share (“Alon Common Stock”), other than Alon Common Stock held by Delek or any subsidiary of Delek, will be converted into the right to receive 0.504 validly issued, fully paid and non-assessable shares of New Common Stock, upon the terms and subject to the conditions set forth in the Merger Agreement (the “New Stock Issuance”).
At the Astro Effective Time (as defined in the Merger Agreement), each restricted share of Alon Common Stock outstanding immediately prior to the Astro Effective Time will (i) be assumed by Holdco and converted into a restricted stock award denominated in shares of New Common Stock and (ii) be subject to substantially the same terms and conditions as applicable to such stock immediately before the Astro Effective Time.
The completion of the Mergers is subject to satisfaction or waiver of certain customary closing conditions, including, among others, (1) the approval of the Merger Agreement by Alon’s stockholders, (2) the approval of the issuance of New Common Stock in connection with the Mergers by Delek’s stockholders, (3) the expiration or termination of any waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, (4) the receipt of all government approvals required to be obtained in connection with the execution and delivery of the Merger Agreement and the consummation of the transactions contemplated thereby (the “Merger Transactions”), (5) the listing of the New Common Stock on the New York Stock Exchange, (6) the effectiveness of the registration statement on Form S-4 registering the shares of Holdco Common Stock issuable in the Merger Transactions, (7) there being no order, decree or injunction prohibiting the consummation of the Merger Transactions, (8) subject to specified materiality standards, the accuracy of the representations and warranties of the other party, (9) performance and compliance by the other party in all material respects with its covenants, and (10) other customary conditions including receipt of a tax opinion from each party’s counsel, dated as of the closing date, to the effect that, (i) in the case of the Astro Merger, such merger will qualify for U.S. federal income tax purposes as an exchange within the meaning of Section 351 of the Internal Revenue Code of 1986, as amended. (the “Code”) and (ii) in the case of the Parent Merger, such merger will qualify for U.S. federal income tax purposes as a reorganization within the meaning of Section 368(a) of the Code.
The Merger Agreement contains customary representations and warranties from both Alon and the Holdco Parties, and each party has agreed to customary covenants, including, among others, covenants relating to (1) the conduct of its business during the interim period between the execution of the Merger Agreement and the effective time of the Mergers, (2) the obligation to use reasonable best efforts to cause the Mergers to be consummated and to obtain all permits, consents, approvals and authorizations of all Governmental Authorities and third parties necessary to consummate the Merger Transactions, (3) the obligation of Alon to call a meeting of its stockholders to approve the Merger Agreement and, subject to certain exceptions, to recommend that its stockholders approve the Merger Agreement and the Merger Transactions and (4) the obligation of Delek to call a meeting of its stockholders to approve the New Stock Issuance and, subject to certain exceptions, to recommend that its stockholders approve the New Stock Issuance. The Merger Agreement also prohibits Alon and Delek from soliciting alternative acquisition proposals, subject to certain exceptions.
Pursuant to the Merger Agreement, Delek must take all action necessary to elect as directors of HoldCo the directors of Delek immediately prior to the Parent Effective Time (as defined in the Merger Agreement); provided, however, within thirty days after the closing date, Delek and HoldCo must take all action necessary to increase the size of the board of directors of HoldCo by one seat and to appoint an individual to such newly created position as designated by the Independent Director Committee (as defined in the Merger Agreement). Pursuant to the Merger Agreement, Delek and HoldCo must also, within thirty days of the closing date, take all action necessary to cause the board of directors of the general partner of Delek Logistics
Partners, L.P. to be increased by one seat, and to appoint an individual to such newly created position as designated by the Independent Director Committee.
The Merger Agreement permits Alon to continue paying a regular dividend of up to $0.15 per share of Alon Common Stock and permits Delek to continue paying a regular quarterly dividend.
The Merger Agreement contains certain termination rights that may be exercised by either Delek or Alon, including in the event that (i) both parties agree by mutual written consent to terminate the Merger Agreement, (ii) the Mergers are not consummated by October 2, 2017, (iii) the approval required from either Delek’s or Alon’s stockholders is not obtained or (iv) any law or order permanently restraining, enjoining or otherwise prohibiting consummation of the Mergers having become final and non-appealable. Additionally, if Alon has not obtained certain consents specified in the Merger Agreement prior to 5:00 p.m. on April 2, 2017, Delek may terminate the agreement by providing Alon with written notice of termination on or before April 7, 2017. Upon termination of the Merger Agreement, under certain circumstances, Alon may be required to pay Delek a termination fee equal to $15,000,000, or Delek may be required to pay Alon a termination fee equal to $20,000,000. In the event either party pays a termination fee, it will have no further liability to the other party with respect to the Merger Agreement, provided, however, that each party remains liable to the other for any additional damages if such party commits a willful and material breach of a covenant, agreement or obligation under the Merger Agreement.
The summary of the Merger Agreement in this Current Report on Form 8-K does not purport to be complete and is qualified by reference to the full text of the Merger Agreement, which is filed as Exhibit 2.1 hereto and incorporated by reference herein.
Voting Agreements
Concurrently with the execution of the Merger Agreement, Alon, Delek and each of David Wiessman, D.B.W. Holdings (2005) Ltd. (an entity controlled by David Wiessman), Jeff Morris, and Karen Morris entered into Voting, Irrevocable Proxy and Support Agreements (the “Voting Agreements”) in connection with the Merger Agreement. Delek, David Wiessman, D.B.W. Holdings (2005) Ltd., Jeff Morris and Karen Morris are each individually referred to herein as an “Alon Stockholder” and collectively as the “Alon Stockholders.”
The Voting Agreements generally require that the Alon Stockholders vote or cause to be voted all Alon Common Stock owned by the Alon Stockholders at the Company Stockholders Meeting in favor of (1) the Mergers and the Merger Agreement and any other transactions or matters contemplated by the Merger Agreement and (2) any proposal to adjourn or postpone the Company Stockholders Meeting (as defined in the Merger Agreement) to a later date if there are not sufficient votes to adopt the Merger Agreement or if there are not sufficient shares present in person or by proxy at such meeting to constitute a quorum. In the case of the Alon Stockholders other than Delek, the Voting Agreements also require that they vote in favor of any other matter necessary to consummate the transactions contemplated by the Merger Agreement, in each case at every meeting (or in connection with any action by written consent) of the Company Stockholders at which such matters are considered and at every adjournment or postponement thereof, and vote against (1) any Company Acquisition Proposal (as defined in the Merger Agreement), (2) any action, proposal, transaction or agreement that could reasonably be expected to result in a breach of any covenant, representation or warranty or any other obligation or agreement of Alon under the Merger Agreement or of the Alon Stockholders under the Voting Agreements and (3) any action, proposal, transaction or agreement that could reasonably be expected to impede, interfere with, frustrate, delay, discourage, adversely affect or inhibit the timely consummation of the Merger or the fulfillment of conditions under the Merger Agreement or change in any manner the voting rights of any class of shares of Alon.
Subject to certain exceptions, the Voting Agreements prohibit certain sales, transfers, offers, exchanges, and dispositions of Alon Common Stock owned by the Alon Stockholders, the granting of any proxies or powers of attorney that is inconsistent with the Voting Agreements, and the depositing of Alon Common Stock owned by the Alon Stockholders into a voting trust or entering into a voting agreement or arrangement with respect to the voting of shares of Alon Common Stock owned by the Alon Stockholders during the term of the Voting Agreements. The Voting Agreements provide that any Alon Common Stock the Alon Stockholders acquire after the execution of the Voting Agreements shall also be subject to the terms of the Voting Agreements.
The Voting Agreements will terminate upon the earliest to occur of (a) the consummation of the Merger, (b) a Company Change in Recommendation or a Parent Change in Recommendation (solely in the case of Delek) made in accordance with the Merger Agreement and (c) the termination of the Merger Agreement pursuant to and in compliance with its terms.
The summary of the Voting Agreements in this Current Report on Form 8-K does not purport to be complete and is qualified by reference to the full text of such agreements, which are filed as Exhibit 10.1, Exhibit 10.2 and Exhibit 10.3 hereto and incorporated by reference herein.
The Merger Agreement and the Voting Agreements and the above descriptions have been included to provide investors and security holders with information regarding the terms of the Merger Agreement and the Voting Agreements. They are not intended to provide any other factual information about Alon, Delek or their respective subsidiaries, affiliates or equity holders. The representations, warranties and covenants contained in the Merger Agreement and the Voting Agreements were made only for purposes of those agreements and as of specific dates; were solely for the benefit of the respective parties to such agreements; and may be subject to limitations agreed upon by the parties, including being qualified by confidential disclosures made by each party to the other for the purposes of allocating contractual risk between them that differ from those applicable to investors. Investors should be aware that the representations, warranties and covenants or any description thereof may not reflect the actual state of facts or condition of Alon, Delek or any of their respective subsidiaries, affiliates, businesses, or equity holders. Moreover, information concerning the subject matter of the representations, warranties and covenants may change after the date of the Merger Agreement and the Voting Agreements, which subsequent information may or may not be fully reflected in public disclosures by Alon or Delek. Accordingly, investors should read the representations and warranties in the Merger Agreement and the Voting Agreements not in isolation but only in conjunction with the other information about Alon, Delek and their respective affiliates and subsidiaries that the respective companies include in reports, statements and other filings they make with the SEC.