Item 1.01 Entry into a Material Definitive Agreement.
On October 18, 2018, Valero Energy Partners LP (the Partnership) entered into an Agreement and Plan of Merger (the
Merger Agreement) with Valero Energy Corporation (VLO), Forest Merger Sub, LLC, an indirect wholly owned subsidiary of VLO (Merger Sub), and Valero Energy Partners GP LLC, the general partner of the Partnership
(the General Partner), pursuant to which Merger Sub will merge with and into the Partnership (the Merger and, together with the Merger Agreement and the other transactions contemplated thereby, the Transaction),
the separate existence of Merger Sub will cease and the Partnership will survive and continue to exist as a Delaware limited partnership.
Pursuant to the Merger Agreement, at the effective time, subject to the terms and conditions set forth therein, each of the common units
representing limited partner interests in the Partnership (the Common Units), other than Common Units owned by VLO and its subsidiaries, will be converted into the right to receive $42.25 per Common Unit in cash without any interest
thereon and all such Common Units will be automatically canceled and cease to exist. The Partnerships incentive distribution rights and general partner interest, and the Common Units owned by VLO and its subsidiaries, other than the
Partnership and its subsidiaries, will be unaffected by the Merger and will remain issued and outstanding in the Partnership, with no consideration being delivered in respect thereof.
The Merger Agreement includes customary representations and warranties and covenants, including, among others, a covenant that the Partnership
will conduct its business in the ordinary course, consistent with past practice, during the interim period between the execution of the Merger Agreement and the consummation of the Transaction. The Partnership has agreed not to directly or
indirectly solicit competing acquisition proposals or to enter into discussions concerning, or provide confidential information in connection with, any unsolicited alternative business combinations. In addition, the Merger Agreement provides that
holders of the Partnerships Common Units will receive a quarterly cash distribution of at least $0.551 per Common Unit for the third quarter of 2018 (the Third Quarter Distribution). However, prior to the closing of the
Transaction, the General Partner may not declare, and the Partnership may not pay, any distribution other than the Third Quarter Distribution without the prior written consent of VLO.
The Merger Agreement also includes customary closing conditions, including, among others, (i) the approval of the Transaction by a
majority of the outstanding Common Units, (ii) the absence of any law or injunction prohibiting the consummation of the Transaction, (iii) the effectiveness of an information statement to be filed by the Partnership on Schedule 14C and
(iv) with respect to VLO, the absence of a material adverse effect with respect to the Partnership. The Merger Agreement contains provisions granting each of VLO and the Partnership the right to terminate the Merger Agreement for certain
reasons, including, among others, (i) by either VLO or the Partnership if the Merger has not been completed by July 18, 2019, (ii) by VLO in response to a change in recommendation by the board of directors of the General Partner (the
GP Board) or (iii) by the Partnership, if the GP Board, subject to the conditions set forth in the Merger Agreement, determines in good faith that, in connection with certain intervening events, the failure to terminate the Merger
Agreement would be a breach of its duties to the unaffiliated holders of Common Units under applicable law, as modified by the Partnerships limited partnership agreement, or the Partnerships limited partnership agreement.
Simultaneously with the execution of the Merger Agreement, the Partnership and an indirect wholly owned subsidiary of VLO that is the record
holder of a majority of the outstanding Common Units 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 Partnerships 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 Partnerships Common Units. The Support Agreement will terminate upon the earliest of (i) the effective time of the Merger, (ii) the termination of the Merger Agreement in accordance with its terms,
(iii) the election of such subsidiary following a change in recommendation by the GP Board in accordance with the terms of the Merger Agreement or (iv) the mutual written agreement of the parties thereto.
The board of directors of VLO (the VLO Board) delegated to a special committee consisting of VLO Board members who do not own any
Common Units (the VLO Special Committee) the full power, authority and responsibility to review, evaluate, negotiate and approve the Transaction, for and on behalf of the VLO Board and VLO. The VLO Special Committee has unanimously
approved the Transaction.