$7 billion buys Tosco
5 Feb 2001
Phillips Petroleum has agreed to purchase Tosco in a $7 billion stock transaction.
Under the terms of the agreement, Phillips will issue 0.8 Phillips shares for each Tosco share and will also assume approximately $2 billion of Tosco's debt. The transaction is expected to close by the end of the third quarter of 2001. Phillips' board of directors also has authorised a $1 billion share buyback program.
Phillips expects the transaction to be accretive to earnings per share, taking into account anticipated annual pre-tax synergies of $250 million and the stock buyback. It will also improve net cash flow. The transaction will be accounted for under purchase accounting.
Based on current consensus investment community estimates, year-end 2001 debt-to-capital ratio would be in the range of 37 percent. This acquisition will not impact the current 2001 capital spending plans of either Phillips or Tosco.
The combined company's RM&T headquarters will be located in Tempe, AZ, with certain functions, including research and development, being located in Bartlesville.
Phillips will acquire all of Tosco's operations, including eight US refineries with a total capacity of 1.35 million barrels per day and 6,400 retail outlets in 32 states. Phillips' current RM&T operations include three US refineries with a total capacity of 360 thousand barrels per day, more than 6,000 retail and aviation outlets in 28 states, and 6,000 miles of pipeline.
The combined company will be the second largest refiner in the United States and third largest marketer, retailing nationwide under the Phillips 66, the '76, and Circle K brands.
The transaction has been approved by both boards, and is subject to customary regulatory reviews and the approval of both companies' shareholders.
Morgan Stanley Dean Witter and Co. is acting as financial advisor to Phillips in this transaction, while Merrill Lynch, and Co. is advising Tosco.
