At the completion of a new merger agreement, Northern Tier will become a wholly owned subsidiary of Western Refining.
Through a new merger agreement, Western Refining Inc. will acquire all of Northern Tier Energy LP’s outstanding common units not already owned by Western.
Under the terms of the merger agreement, Northern Tier unitholders will receive $15 in cash and 0.2986 of a share of Western Refining common stock for each Northern Tier common unit held. Using the Western Refining 20-day volume weighted average price as of Oct. 23, 2015 (the last trading day before Western Refining made its initial offer to acquire all of Northern Tier’s outstanding common units) results in an implied consideration of $28.34 for each Northern Tier unit. This represents an 18% premium to the 20-day volume weighted average price of Northern Tier’s common unit price as of Oct. 23, 2015.
As an alternative to the cash and stock consideration, each Northern Tier unit holder may elect to receive, per Northern Tier unit, either $26.06 in cash or 0.7036 of a share of Western Refining. The election will be subject to proration to ensure that the aggregate cash paid and Western Refining common stock issued in the merger will equal the total amount of cash and number of shares of Western Refining common stock that would have been paid and delivered if all Northern Tier unit holders received $15 in cash and 0.2986 of a share of Western common stock per Northern Tier common unit. Upon completion, Northern Tier unit holders are expected to own approximately 15% of Western Refining. The transaction is expected to close in the first half of 2016.
Western Refining intends to fund the cash portion of the merger consideration with a combination of cash-on-hand and debt financing. Assuming completion of the proposed transaction, Northern Tier will become a wholly-owned subsidiary of Western Refining and Northern Tier common units will cease to be publicly traded. Northern Tier’s 7.125% Senior Secured Notes due 2020 and revolving credit facility are expected to remain in place.
Jeff Stevens, president and CEO of Western Refining said, “The merger of Western and Northern Tier will result in the combined entity owning three of the most profitable independent refineries on a gross margin per barrel basis, with direct pipeline access to advantaged crude oil combined with an integrated retail and wholesale distribution network. With a simplified corporate structure and diverse geographic base, Western will have greater access to capital and be positioned to profitably grow the company. We are excited to move forward with this transaction and continue to maximize opportunities to deliver shareholder value.”
“The variable distribution MLP model has not been rewarded by the equity market, as evidenced by the historical disconnect between Northern Tier’s high yield and low unit price. With a simplified corporate structure and diverse geographic base, the new Western will be well positioned to unlock additional value for shareholders,” said Dave Lamp, president and CEO of Northern Tier.
Paul Foster will remain executive chairman and Jeff Stevens will remain CEO of Western Refining. Upon the closing of the transaction, Dave Lamp will be named president and chief operating officer of Western. The Western Refining board of directors will remain unchanged.
The terms of the merger agreement were approved by the Western Refining board of directors and the conflicts committee of the board of directors of Northern Tier’s general partner, which negotiated the terms on behalf of Northern Tier. The conflicts committee of the board of directors of Northern Tier’s general partner is comprised solely of independent directors who retained independent financial and legal advisors in connection with their evaluation of the merger.
The closing of the merger is subject to the satisfaction of customary closing conditions, including the expiration or termination of all waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act and the approval of the merger at a special meeting of Northern Tier unit holders by the affirmative vote of holders of a majority of the outstanding Northern Tier common units (including the Northern Tier common units held by Western Refining). Western Refining currently owns approximately 38% of the common units and 100% of the general partnership interest of Northern Tier, and Western Refining has agreed to vote all of the Northern Tier common units it owns in favor of the merger.
