Valero Energy Corporation (NYSE: VLO) (“Valero”) and Valero Energy
Partners LP (NYSE: VLP) (the “Partnership”) today announced the
execution of a definitive agreement and plan of merger (the “Merger
Agreement” and, together with the transactions contemplated
thereby, the “Transaction”) pursuant to which Valero will acquire,
for cash, all of the outstanding publicly held common units of the
Partnership at a price of $42.25 per common unit, for an aggregate
transaction value of approximately $950 million. The Transaction
price represents an approximate 12.4 percent premium to the 30
trading-day volume weighted average price of the Partnership’s
common units as of October 17, 2018.
The Partnership also announced today that the
board of directors (the “GP Board”) of the general partner of the
Partnership declared a quarterly cash distribution of $0.551 per
unit on all of its outstanding common units for the quarter ended
September 30, 2018 (the “Third Quarter Distribution”). The Third
Quarter Distribution is payable on November 9, 2018 to unitholders
of record at the close of business on November 1, 2018. Under the
Merger Agreement, prior to the closing of the Transaction, the GP
Board may not declare, and the Partnership may not pay, any
distribution other than the Third Quarter Distribution.
Simultaneously with the execution of the Merger
Agreement, the Partnership and an indirect wholly owned subsidiary
of Valero that is the record holder of the common units of the
Partnership that are beneficially owned by Valero entered into a
support agreement (the “Support Agreement”) whereby such subsidiary
has agreed to deliver a written consent approving the Transaction
prior to the closing thereof. The written consent delivered
pursuant to the Support Agreement will constitute the requisite
vote of the Partnership’s common units to approve the Transaction.
As a result, the Partnership has not solicited and is not
soliciting approval of the Transaction by holders of the
Partnership’s common units.
The Transaction will close as soon as possible
following the satisfaction of certain customary closing conditions.
Upon the closing of the Transaction, the Partnership will be an
indirect wholly owned subsidiary of Valero and will cease to be a
publicly held partnership.
The board of directors of Valero (the “Valero
Board”) delegated to a special committee consisting of Valero Board
members who do not own any of the Partnership’s common units (the
“Valero Special Committee”) the full power, authority and
responsibility to review, evaluate, negotiate and approve the
Transaction, for and on behalf of the Valero Board and Valero. The
Valero Special Committee has unanimously approved the
Transaction.
Upon receiving the merger proposal, on September
21, 2018 the GP Board directed its Conflicts Committee, composed
entirely of independent directors (the “GP Conflicts Committee”),
to review, evaluate, negotiate and provide special approval of the
Transaction. The GP Conflicts Committee, after consultation with
its independent legal and financial advisors, and following
negotiations between the GP Conflicts Committee and the Valero
Special Committee increasing the price per common unit and certain
other changes, unanimously approved the Transaction and determined
that the Transaction is fair and reasonable to the unaffiliated
holders of the Partnership’s common units and in the best interest
of the Partnership. Following the determination of the GP Conflicts
Committee, the GP Board unanimously approved the Transaction and
determined that the Transaction is fair and reasonable to the
unaffiliated holders of the Partnership’s common units and in the
best interest of the Partnership.
Advisors
J.P. Morgan Securities LLC acted as financial
advisor to Valero, Baker Botts L.L.P. acted as Valero’s legal
advisor and Richards, Layton & Finger, PA acted as special
Delaware counsel to Valero on the Transaction. Jefferies LLC acted
as financial advisor to the GP Conflicts Committee and Akin Gump
Strauss Hauer & Feld LLP acted as the GP Conflicts Committee’s
legal advisor on the Transaction.
Forward-Looking Statements
This release may include “forward-looking
statements.” The safe harbor provisions under Section 27A of
the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934 do not apply to forward-looking statements
made or referred to in this release. All statements, other than
historical facts included in this release, are forward-looking
statements. The forward-looking statements contained herein include
statements related to the Transaction as described above. Such
forward-looking statements are subject to a number of risks and
uncertainties, many of which are beyond the control of Valero and
the Partnership, including the risk that the proposed Transaction
is not consummated on the expected time frame or at all. All
forward-looking statements speak only as of the date of this
release. Although Valero and the Partnership believe that the
plans, intentions and expectations reflected in or suggested by the
forward-looking statements are reasonable, there is no assurance
that these plans, intentions or expectations will be achieved.
Therefore, actual outcomes and results could materially differ from
what is expressed, implied or forecast in such statements.
Valero’s and/or the Partnership’s ability to
consummate the proposed Transaction and their respective businesses
may be influenced by many factors that are difficult to predict,
involve uncertainties that may materially affect actual results and
are often beyond the control of Valero and the Partnership. These
factors include, but are not limited to, failure of closing
conditions, delays in the consummation of the Transaction and
changes to business plans, as circumstances warrant. For a full
discussion of these risks and uncertainties and other factors,
please refer to Valero’s and the Partnership’s respective Annual
Report on Form 10-K for the fiscal year ended December 31, 2017,
filed with the Securities and Exchange Commission (the “SEC”), as
updated and supplemented by subsequent filings with the SEC. All
forward-looking statements included in this release are expressly
qualified in their entirety by such cautionary statements. Valero
and the Partnership expressly disclaim any obligation to update,
amend or clarify any forward-looking statement to reflect events,
new information or circumstances occurring after the date of this
release except as required by applicable law.
Important Information About the Proposed
Transaction
Valero and the Partnership will each file with
the SEC a Current Report on Form 8-K, which will contain, among
other things, a copy of the Merger Agreement and the Support
Agreement. In connection with the proposed Transaction, the
Partnership will prepare an information statement to be filed with
the SEC that will provide additional important information
concerning the proposed Transaction. When completed, a definitive
information statement will be mailed to the Partnership’s
unitholders. THE PARTNERSHIP’S UNITHOLDERS ARE STRONGLY ADVISED TO
READ ALL RELEVANT DOCUMENTS FILED WITH THE SEC, INCLUDING THE
PARTNERSHIP’S INFORMATION STATEMENT, BECAUSE THEY WILL CONTAIN
IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION. The
Partnership’s unitholders will be able to obtain, without charge, a
copy of the information statement (when available) and other
relevant documents filed with the SEC from the SEC’s website at
www.sec.gov. The Partnership’s unitholders will also be able to
obtain, without charge, a copy of the information statement and
other documents relating to the proposed Transaction (when
available) at www.valeroenergypartners.com or by contacting the
individuals listed below.
Section 1446 Tax
Notification
This release serves as qualified notice to
brokers and nominees as provided for under Treasury Regulation
Section 1.1446-4(b)(4) and (d). Please note that 100 percent
of the Partnership’s distributions to foreign investors are
attributable to income that is effectively connected with a United
States (“U.S.”) trade or business. Accordingly, all of the
Partnership’s distributions to foreign investors are subject to
federal income tax withholding at the highest effective tax rate
for individuals or corporations, as applicable. Brokers and
nominees, and not the Partnership, are treated as withholding
agents responsible for withholding distributions received by them
on behalf of foreign investors.
About Valero
Valero Energy Corporation, through its
subsidiaries, is an international manufacturer and marketer of
transportation fuels and other petrochemical products.
Valero, a Fortune 50 company based in San Antonio, Texas, with
approximately 10,000 employees, is an independent petroleum refiner
and ethanol producer, and its assets include 15 petroleum
refineries with a combined throughput capacity of approximately 3.1
million barrels per day and 11 ethanol plants with a combined
production capacity of 1.45 billion gallons per year. The
petroleum refineries are located in the U.S., Canada, and the
United Kingdom (“U.K.”), and the ethanol plants are located in the
Mid-Continent region of the U.S. In addition, Valero owns the
2 percent general partner interest and a majority limited partner
interest in Valero Energy Partners LP. Valero sells its
products in both the wholesale rack and bulk markets, and
approximately 7,400 outlets carry Valero’s brand names in the U.S.,
Canada, the U.K., and Ireland. Please visit www.valero.com
for more information.
About the Partnership
Valero Energy Partners LP is a master limited
partnership formed by Valero Energy Corporation to own, operate,
develop and acquire crude oil and refined petroleum products
pipelines, terminals, and other transportation and logistics
assets. With headquarters in San Antonio, the Partnership’s assets
include crude oil and refined petroleum products pipeline and
terminal systems in the Gulf Coast and Mid-Continent regions of the
U.S. that are integral to the operations of 10 of Valero’s
refineries. Please visit www.valeroenergypartners.com for more
information.
Contacts for Valero and the
Partnership
Investors:
John Locke, Vice President – Investor Relations,
210-345-3077
Karen Ngo, Senior Manager – Investor Relations,
210-345-4574
Tom Mahrer, Manager – Investor Relations,
210-345-1953
Media:
Lillian Riojas, Executive Director – Media
Relations and Communications, 210-345-5002
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