Western Refining Inc. WNR has signed an agreement with Northern Tier Energy LP NTI to purchase all outstanding common units of the partnership which are not already under the company’s hold.
Per the accord, the unitholders of Northern Tier will get $15 in cash along with 0.2986 share of Western Refining for every unit of the partnership. Following the closure of the deal – expected by the first half of 2016 − Northern Tier will be the wholly-owned affiliate of Western Refining. Moreover, the partnership’s units will no more be traded publicly. Investors should also know that upon completion of the transaction, the unitholders of the partnership will own 15% of the company.
Notably, this is a revised offer by Western Refining – which presently has 38% interest in the partnership. In the prior proposal made in October, Western Refining had offered cash of $17.50 along with 0.2266 shares for every unit of the partnership.
Western Refining is likely to utilize cash on hand along with debt for funding the cash portion of the transaction. Management added that with the purchase of the downstream player Northern Tier – engaged in the refining, retail and transportation activities – the merged company will have a broader presence that will likely help to unlock further shareholder value.
Incorporated in 2005, El Paso, TX-headquartered Western Refining is an independent refiner and marketer of refined petroleum products in the Southwestern and Mid-Atlantic regions of the U.S. Benefitting from the weak crude pricing environment, Western Refining has maintained its excellent track record of earnings surprise history, beating estimates in each of the last four quarters. Also, with commodity prices likely to remain weak and demand for petroleum products anticipated to rise, Western Refining can expect continued growth.
As a result, the company currently carries a Zacks Rank #2 (Buy), implying that it will outperform the broader U.S. equity market over the next one to three months.
Meanwhile, better-ranked players in the energy sector include Energy Transfer Equity, L.P. ETE and Ocean Rig UDW Inc. ORIG. Both the stocks sport a Zacks Rank #1 (Strong Buy).
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