First Israel Mezzanine Investors Fund (FIMI) has invested $36 million in options and shares of Alon USA Energy Inc. (NYSE:ALJ), after three months of negotiations.
Alon Israel Oil Company Ltd. owns 76% of Alon USA, an operator of refineries. Alon Israel chairman David Wiessman directly owns 2.3% of Alon USA.
The investment, like other mezzanine investments by FIMI, is in two parts. The first part, which has been completed, FIMI invested $18 million in Alon USA subsidiary Alon Brand Inc., which handles the company's retail operations, as part of a debt offering. The bonds will bear 7% annual interest, well below the interest rate at which Alon USA previously issued bonds to investors.
FIMI was also given $18 million in options, exercisable for shares in either Alon USA or Alon Brand, at FIMI's discretion. Both the bonds and options are for five years. The strike price for the options is $9.70 per share, 13% below Alon USA's opening price.
FIMI bought $5 million of Alon USA shares in October 2010 as part of a $40 million offering of preferred stock. Public response to the offering was low, and Alon Group ended up buying most of the shares.
Alon USA owns refineries in Texas, Louisiana, and California. It converts oil that cannot be refined at its refineries into asphalt. The company owns a patent for high quality asphalt made of recycled tires. Alon USA also owns 1,000 gas stations under the Fina brand, operated by Alon Brand. Alon Brand also operates 304 7-Eleven convenience stores in several states, mainly in Texas and New Mexico. Alon Brand has filed a prospectus for an IPO, which it may carry out this year.
Alon USA's share price fell 3.8% in early trading today to $10.99, giving a market cap of $590 million.
Published by Globes [online], Israel business news - www.globes-online.com - on March 15, 2011
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