EXHIBIT 99.1
Western Refining
Giant Industries, Inc.
For Immediate Release
WESTERN REFINING TO ACQUIRE GIANT INDUSTRIES CREATING THE FOURTH
LARGEST PUBLICLY-TRADED INDEPENDENT REFINER AND MARKETER
IN THE UNITED STATES
Transaction Adds Scale, Diversifies Western's Business Mix and Increases
Western's Crude Oil Throughput Capacity by 84% to Approximately 216,000
Barrels Per Day
Expected by Western to be Immediately Accretive to Western's Cash Flow
and Earnings Per Share
EL PASO, Texas and SCOTTSDALE, Arizona - August 28, 2006 - Western Refining,
Inc. (NYSE:WNR) and Giant Industries, Inc. (NYSE:GI) today announced that
the Boards of Directors of both companies have unanimously approved a
definitive merger agreement under which Western will acquire all of the
outstanding shares of Giant for $83.00 per share in cash. The transaction
is valued at approximately $1.5 billion, including approximately $275
million of Giant's outstanding debt.
After completing the transaction, Western will be the fourth largest
publicly-traded independent refiner and marketer in the United States with
a total crude oil throughput capacity of approximately 216,000 barrels per
day (bpd). In addition to Western's 117,000 bpd refinery in El Paso, Texas,
Western will gain an East Coast presence with a 62,000 bpd refinery in
Yorktown, Virginia and will gain two refineries in the Four Corners region
of Northern New Mexico with a current combined capacity of 37,000 bpd.
Western's primary operating areas will encompass the Mid-Atlantic region,
far West Texas, Phoenix and Tucson, Arizona, Northern Mexico, Albuquerque,
New Mexico and the Four Corners region of Utah, Colorado, Arizona and New
Mexico. In addition to the four refineries, Western's asset portfolio will
include refined products terminals in Flagstaff, Arizona and Albuquerque,
as well as asphalt terminals in Phoenix, Tucson, Albuquerque and El Paso.
Western's asset base will also include 159 retail service stations and
convenience stores in Arizona, Colorado and New Mexico, a fleet of
approximately 100 crude oil and finished product truck transports, and two
wholesale petroleum products distributors - Phoenix Fuel Co., Inc. in
Arizona and Dial Oil Co. in New Mexico.
"This transaction is a win for our shareholders, employees, customers and
the communities we serve," said Western's President and Chief Executive
Officer, Paul Foster. "With Giant, we will significantly increase our
refining capacity in fast growing, high demand areas and gain an immediate
footprint in new, complementary businesses. With this enhanced growth
platform and Western's continued financial strength, we will be better able
to capitalize on the strong fundamentals in our industry and drive
shareholder value.
"We look forward to Giant's employees joining the Western team following
closing. I'm confident that the substantial employee talent and operating
expertise from both companies will enable us to achieve significant growth
from our asset portfolio and realize the substantial upside potential we
see with this combination. As we move forward and grow together, we intend
to maintain our record of safety and environmental stewardship that has
made us an industry leader," continued Mr. Foster.
Fred Holliger, Giant's Chairman and Chief Executive Officer, said, "The
transaction provides Giant shareholders with a meaningful return on their
investment and recognizes the value of our strategy and assets for our
shareholders. The transaction also offers our employees the opportunity to
be part of a larger organization with greater economies of scale and
resources needed for sustained success in our industry. Western is a
company that we know well, and we believe that our employees will benefit
from the cultural fit. I thank each of our employees for their many
contributions that have helped build Giant and achieve the successes that
enabled our shareholders to realize the significant value this transaction
will deliver. Giant's Board of Directors has unanimously approved the
transaction and will recommend that shareholders vote in favor of it. We
are committed to completing the transaction as expeditiously as possible
and to ensuring a seamless transition."
Benefits of the Transaction to Western
- - Enhanced Refining Platform in Key Growth Areas: By expanding its
refining operations from one to four facilities, Western will
significantly diversify its operations in fast growing, high demand
areas.
In addition, Western will double its lower-cost sour and heavy crude
processing capacity from approximately 12% currently to almost 25%;
Western's sour and heavy crude processing capacity will reach 46%
following the completion of its previously announced expansion program
at its El Paso facility. The Yorktown, Virginia refinery also has the
flexibility to incorporate future growth initiatives given its ability
to process cost-advantaged feedstocks.
- - Immediate Footprint in Complementary Businesses: Currently Western
generates most of its revenues from its refining operations in El Paso.
Following the close of the transaction, Western will generate revenue
from four different refineries as well as a diverse mix of complementary
retail and wholesale businesses.
- - Operational Efficiencies and Cost Savings: The transaction is expected
by Western to generate refinery efficiencies and cost savings of
approximately $20 million annually in 2008. Western expects to derive
approximately half of these synergies from improved efficiencies at its
refineries and the remainder from savings achieved through the
consolidation of overlapping functions. Significant workforce reductions
are not expected.
- - Accelerated Cash Flow and Earnings Growth: Western expects the
transaction to be immediately and significantly accretive to its cash
flow and earnings per share, excluding one-time transaction costs.
- - Financial Strength and Flexibility: The transaction will be funded
through a combination of approximately $250 million in cash on hand and
a $2.0 billion commitment from Bank of America, consisting of up to a
$1.5 billion senior secured term loan and a $500 million senior secured
revolving credit facility. Based on June 30, 2006 figures, initial pro
forma debt to trailing twelve months adjusted EBITDA will be 2.4x with
an adjusted EBITDA to interest expense of 5.2x. Following the
transaction, Western believes its strong cash flow from operations will
allow it to reduce its net debt and fully fund its capital program. The
limited amortization payments and prepayable nature of the term loan
provide Western significant financial flexibility.
Western Dividend Policy
It is currently anticipated that Western's Board of Directors will continue
its regular quarterly cash dividend of $0.04 per share on Western's common
stock. However, declarations of dividends are determined by the Board of
Directors each quarter after its review of Western's financial performance.
Western Management and Headquarters
Following the close of the transaction, Paul Foster will remain President
and Chief Executive Officer of Western, and Fred Holliger will serve as a
special advisor to Western's Board of Directors. The combined company will
be headquartered in El Paso and will maintain offices in Scottsdale.
Path to Closing
The transaction is subject to approval by Giant shareholders and the
satisfaction of customary closing conditions and regulatory approvals,
including expiration or termination of the applicable waiting period under
the Hart-Scott-Rodino Antitrust Improvements Act. The transaction is
expected to close in the fourth quarter of 2006 and is not subject to any
financing conditions.
Western has a track record of successfully executing on strategic
transactions. Given the complementary nature of Western and Giant's
businesses, Western expects to realize the benefits of this transaction
quickly and efficiently.
In connection with the transaction, Giant anticipates that it will commence
a tender offer and consent solicitation relating to Giant's 8% Senior
Subordinated Notes due 2014 and 11% Senior Subordinated Notes due 2012.
Details with respect to this tender offer and consent solicitation will be
set forth in tender offer documents, which will be furnished to the holders
of the notes at the appropriate time.
Advisors
In connection with the transaction, Banc of America Securities LLC is
acting as sole financial advisor to Western, and Andrews Kurth LLP and
Robins, Kaplan, Miller & Ciresi, LLP are legal counsel. Deutsche Bank
provided a fairness opinion to Giant and is acting as sole financial
advisor, and Ballard Spahr Andrews & Ingersoll, LLP is legal counsel.
Analyst/Investor Conference Call and Webcast
Western will hold a conference call and webcast today at 10 a.m. Eastern
Time / 8 a.m. Mountain Time to discuss this morning's announcement.
Presentation materials can be accessed through Western's website at
http://www.westernrefining.com. To participate in the call, dial 888-603-
6873, conference code 7784400. International callers should dial 973-582-
2706. The call will also be simultaneously webcast on Western's website at
http://www.westernrefining.com.
A replay of the conference call will be available through September 28,
2006 and can be accessed by dialing 877-519-4471, conference code 7784400.
International callers can access the replay by dialing 973-341-3080. The
replay will also be available at Western's website,
http://www.westernrefining.com.
About Western Refining
Western Refining, Inc., headquartered in El Paso, Texas, is an independent
crude oil refiner and marketer of refined products, operating primarily in
the Southwest region of the United States, including Arizona, New Mexico
and West Texas.
About Giant Industries
Giant Industries Inc., headquartered in Scottsdale, Arizona, is a refiner
and marketer of petroleum products. Giant owns and operates one Virginia
and two New Mexico crude oil refineries, a crude oil gathering pipeline
system based in Farmington, New Mexico, which services the New Mexico
refineries, finished products distribution terminals in Albuquerque, New
Mexico, and Flagstaff, Arizona, a fleet of crude oil and finished product
truck transports, and a chain of retail service station/convenience stores
in New Mexico, Colorado and Arizona. Giant is also the parent company of
Phoenix Fuel Co. Inc. and Dial Oil Co., both of which are wholesale
petroleum products distributors. For more information, please visit Giant's
website at www.giant.com.
Cautionary Statement on Forward-Looking Statements
This press release contains forward-looking statements. The forward-looking
statements contained herein include statements about the consummation of
the proposed merger and the benefits of the proposed merger. These
statements are subject to inherent risks regarding the satisfaction of the
conditions to the closing of the merger and the timing of the closing if it
occurs. Forward looking statements also include those by Western regarding
growth in areas it does business, growth of its asset portfolio, upside
potential of the merger, future amounts of sour and heavy crude processing,
future cost of feedstocks, future operational efficiencies and cost savings,
future cash flow and earnings growth, financial EBITDA ratios, future
dividend policies, the expected closing date of the merger, the timing of
realizing the benefits of the merger, accretion, future throughput capacity,
projections of financial strength and flexibility and future refinery
utilization rates. These expectations may or may not be realized. Some of
these expectations may be based upon assumptions or judgments that prove to
be incorrect. In addition, Western's and Giant's business and operations
involve numerous risks and uncertainties, many of which are beyond
Western's or Giant's control, which could result in Western's or Giant's
expectations not being realized or otherwise materially affect Western's or
Giant's financial condition, results of operations and cash flows.
Additional information relating to the uncertainties affecting Western's
and Giant's businesses is contained in their respective filings with the
Securities and Exchange Commission. The forward-looking statements speak
only as of the date made, and Western and Giant do not undertake any
obligation to (and expressly disclaim any obligation to) update any forward
looking statements to reflect events or circumstances after the date such
statements were made, or to reflect the occurrence of unanticipated events.
Additional Information About This Transaction
This press release may be deemed to be soliciting material relating to the
proposed merger transaction between Western and Giant. In connection with
the proposed merger, Giant plans to file a proxy statement with the SEC.
Investors and security holders of Giant are advised to read the proxy
statement and any other relevant documents filed with the SEC when they
become available because those documents will contain important information
about the proposed merger. The final proxy statement will be mailed to
stockholders of Giant. Investors and security holders may obtain a free
copy of the proxy statement when it becomes available, and other documents
filed by Giant with the SEC, at the SEC's website at http://www.sec.gov.
Copies of the proxy statement, when it becomes available, and Giant's other
filings with the SEC may also be obtained free of charge from Giant
Industries, Inc., 23733 North Scottsdale Road, Scottsdale, Arizona 85255,
Attention: Investor Relations.
Participants in the Solicitation
Western, Giant and their respective directors, executive officers and other
members of their management and employees may be deemed to be soliciting
proxies from Giant's stockholders in favor of the proposed merger.
Information regarding Western's directors and executive officers is
available in Western's proxy statement for its 2006 annual meeting of
stockholders, which was filed with the SEC on April 25, 2006. Information
regarding Giant's directors and executive officers is available in Giant's
proxy statement for its 2006 annual meeting of stockholders, which was
filed with the SEC on March 1, 2006. Additional information regarding the
interests of such potential participants will be included in the proxy
statement and the other relevant documents filed with the SEC when they
become available.
Contacts:
Western Refining Giant Industries
Scott Weaver Mark B. Cox
915-775-3300 480-585-8888
OR
Barrett Golden / Jamie Moser
Joele Frank, Wilkinson Brimmer Katcher
212-355-4449
Adjusted EBITDA Reconciliation
Adjusted EBITDA represents earnings before interest expense, income tax
expense, amortization of loan fees, write-off of unamortized loan fees,
depreciation, amortization and maintenance turnaround expense. However,
Adjusted EBITDA is not a recognized measurement under GAAP. Our management
believes that the presentation of Adjusted EBITDA is useful to investors
because it is frequently used by securities analysts, investors and other
interested parties in the evaluation of companies in our industry. In
addition, our management believes that Adjusted EBITDA is useful in
evaluating our operating performance compared to that of other companies in
our industry because the calculation of Adjusted EBITDA generally
eliminates the effects of financings, income taxes and the accounting
effects of significant turnaround activities (which many of our competitors
capitalize and thereby exclude from their measures of EBITDA) and
acquisitions, items that may vary for different companies for reasons
unrelated to overall operating performance.
Adjusted EBITDA has limitations as an analytical tool, and you should not
consider it in isolation, or as a substitute for analysis of our results as
reported under GAAP. Some of these limitations are:
- - Adjusted EBITDA does not reflect our cash expenditures or future
requirements for significant turnaround activities, capital expenditures
or contractual commitments;
- - Adjusted EBITDA does not reflect the interest expense or the cash
requirements necessary to service interest or principal payments on our
debt;
- - Adjusted EBITDA does not reflect changes in, or cash requirements for,
our working capital needs; and
- - our calculation of Adjusted EBITDA may differ from the Adjusted EBITDA
calculations of other companies in our industry, thereby limiting its
usefulness as a comparative measure.
Because of these limitations, Adjusted EBITDA should not be considered a
measure of discretionary cash available to us to invest in the growth of
our business. We compensate for these limitations by relying primarily on
our GAAP results and using Adjusted EBITDA only supplementally.
The following table reconciles net income to Adjusted EBITDA for the
periods presented (in thousands) for Giant Industries, Inc.:
6 Months Ending 12 Months
-------------------- Ending
2005 6/30/2006 6/30/2005 6/30/2006
- --------------------------------------------------------------------------------------------
Net income $103,878 $36,889 $30,611 $110,156
Effect of change in accounting principle, net 68 0 0 68
(Net income) loss from discontinued operations (15) 0 (15) 0
Income taxes 69,146 21,967 21,644 69,469
Amortization/write-off of financing costs 2,797 798 2,000 1,595
Costs associated with early debt extinguishment 2,082 0 2,099 (17)
Interest expense 24,485 8,860 13,376 19,969
Depreciation and amortization 40,280 20,536 20,463 40,353
- --------------------------------------------------------------------------------------------
Adjusted EBITDA $242,721 $89,050 $90,178 $241,593
The following table reconciles net income to Adjusted EBITDA for the periods
presented (in thousands) for Western Refining, Inc. and for the two companies
on a pro forma combined basis:
6 Months Ending 12 Months
-------------------- Ending
2005 6/30/2006 6/30/2005 6/30/2006
- --------------------------------------------------------------------------------------------
Net income $201,100 $ 66,759 $ 64,238 $203,621
Income taxes 0 62,281 0 62,281
Amortization/write-off of financing costs 2,113 250 1,517 846
Costs associated with early debt extinguishment 3,287 1,961 0 5,248
Interest expense 6,578 1,450 2,541 5,487
Depreciation and amortization 6,272 5,453 2,852 8,873
Maintenance turnaround expense 6,999 22,196 5,884 23,311
- --------------------------------------------------------------------------------------------
Adjusted EBITDA $226,349 $160,350 $77,032 $309,667
Pro Forma Combined $551,260