Delek Group Ltd. (TASE: DLEKG) subsidiary Delek US Holdings Inc. (NYSE:DK) notified the US Securities and Exchange Commission (SEC) on Friday that it "is currently exploring the potential acquisition of certain petroleum refining, retail, and wholesale marketing assets in the US" for $1 billion."
The assets include a petroleum refinery with a capacity of 75,000-100,000 barrels per day that produces mainly light products, a refined products terminal, fuel transportation trucks. The deal also includes buying, or entry into, wholesale supply agreements with 400 to 450 stores. The company was granted an exclusive negotiation period that expires at the end of July 2008 and will conduct due diligence until then. Delek US has asked Delek Group to provide it with a non-binding letter of intent expressing Delek Group's willingness to provide Delek US with financial support up to $200 million if the deal is closed.
US energy market sources believe that Delek US is seeking to buy a refinery in Oklahoma. Valero Energy Corporation (NYSE: VLO) and Sonoco Products Company (NYSE: SON) have both put up refineries for sale because of eroding profit margins.
Ten weeks ago, "Globes" was the first to report that Delek US was considering the acquisition of more refineries for up to $2 billion. These included possible stakes in Valero refineries in Tennessee, Oklahoma, and Louisiana.
Delek US is seeking to acquire refineries at a time when their profit margins are declining because of the surge in crude oil prices. Most analysts believe that this has created opportunities to buy.
Delek US fell 3.8% on Friday to $9.01, giving a market cap of $483 million. The share is near the bottom of its 52-week range of $8.84-30.77.
Published by Globes [online], Israel business news - www.globes-online.com - on June 29, 2008
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