Filed by Ultramar Diamond Shamrock Corporation
Pursuant to Rule 425 under the Securities Act of 1933
and deemed filed pursuant to Rule 14a-12
under the Securities Exchange Act of 1934
Subject Company: Ultramar Diamond Shamrock Corporation
Commission File No. 1-11154
On May 8, 2001, Ultramar Diamond Shamrock Corporation ("UDS") released the
following supplemental information.
* * * *
The enclosed materials contain forward-looking statements within the meaning of
the "safe harbor" provisions of the Private Securities Litigation Reform Act of
1995. These statements are based on management's current expectations and
beliefs and are subject to a number of factors and uncertainties that could
cause actual results to differ materially from those described in the
forward-looking statements. The forward-looking statements contained in this
release include statements about future financial and operating results and the
proposed Valero Energy Corporation ("Valero")/UDS merger.
The following factors, among others, could cause actual results to differ
materially from those described in the forward-looking statements: the risk that
Valero's and UDS's businesses will not be integrated successfully; costs related
to the merger; failure of the Valero or UDS stockholders to approve the merger;
and other economic, business, competitive and/or regulatory factors affecting
Valero's and UDS's businesses generally as set forth in Valero's and UDS's
filings with the Securities and Exchange Commission, including their Annual
Reports on Form 10-K for the fiscal year ended 2000, especially in the
Management's Discussion and Analysis section, their most recent Quarterly
Reports on Form 10-Q and their Current Reports on Form 8-K. Valero and UDS are
under no obligation to (and expressly disclaim any such obligation to) update or
alter their forward-looking statements whether as a result of new information,
future events or otherwise.
INVESTORS AND SECURITY HOLDERS ARE URGED TO READ THE JOINT PROXY
STATEMENT/PROSPECTUS REGARDING THE BUSINESS COMBINATION TRANSACTION REFERENCED
IN THE FOREGOING INFORMATION, WHEN IT BECOMES AVAILABLE, BECAUSE IT WILL CONTAIN
IMPORTANT INFORMATION. The joint proxy statement/prospectus will be filed with
the Securities and Exchange Commission by Valero and UDS. Investors and security
holders may obtain a free copy of the joint proxy statement/prospectus (when it
is available) and other documents filed by Valero and UDS with the Commission at
the Commission's web site at www.sec.gov. The joint proxy statement/prospectus
and these other documents may also be obtained for free from Valero and UDS.
READ THE DEFINITIVE JOINT PROXY STATEMENT/PROSPECTUS CAREFULLY BEFORE MAKING A
DECISION CONCERNING THE MERGER.
Valero and UDS, and their respective directors, executive officers and certain
other of their respective employees, may be soliciting proxies from their
respective stockholders in favor of the approval of the merger. Information
regarding the persons who may, under SEC rules, be deemed to be participants in
the solicitation of Valero and UDS stockholders in connection with the merger is
set forth, in the case of Valero, in Valero's proxy statement for its 2001
annual meeting, filed with the SEC on March 28, 2001, and in the case of UDS, in
UDS's proxy statement for its 2001 annual meeting, filed with the SEC on March
27, 2001, and additional information will be set forth in the definitive proxy
statement/prospectus referred to above when it is filed with the SEC.
* * * *
THE FOLLOWING SUPPLEMENTAL INFORMATION WAS RELEASED BY VALERO ENERGY CORPORATION
ON MAY 8, 2001:
Q1. What is the total consideration Valero is paying for the outstanding UDS
common stock?
A1. The total consideration equates to $55 in cash for half of the outstanding
UDS common stock and a fixed exchange ratio of 1.228 Valero shares for each
of the remaining outstanding UDS common shares, for aggregate consideration
of approximately $2 billion in cash plus 44.4 million Valero shares.
Q2. How does the election feature work?
A2. A UDS stockholder can elect to receive consideration in the form of cash,
Valero stock or a combination. Whatever the form, the per share considera-
tion will have the same value, based on the average Valero stock price over
a 10-day measurement period ending 3 days prior to closing. That value
will be the average of $55 and the measurement period value of 1.228 Valero
shares (or, put another way, the sum of $27.50 and the measurement period
value of 0.614 Valero shares).
Q3. Are there any limits on my ability to elect cash or stock?
A3. Elections will be subject to proration so that the total number of Valero
shares to be issued and the total amount of cash to be paid in the merger to
UDS shareholders as a group are each fixed (except that, in limited
circumstances, Valero may add more stock, valued as of the closing and in
lieu of cash, if needed to maintain the tax-free treatment of the merger).
If stock is oversubscribed, then UDS stockholders who have elected stock
will nevertheless receive cash for some of their UDS shares, on a pro rata
basis, and vice versa if cash is oversubscribed.
Q4. What are the limits on the number of UDS shares that can elect cash or
Valero stock, respectively, before UDS stockholders are prorated?
A4. The total amount of cash Valero will pay is simply $55 times 50% of the
outstanding number of UDS shares at closing, and the total number of Valero
shares Valero will issue is 1.228 times 50% of the outstanding number of
UDS shares at closing. This aggregate consideration will allow all UDS
shareholders to receive either cash, shares of Valero stock or a combination
that, in each case, has a per share value equal to the sum of (x) $27.50 and
(y) 0.614 times the measurement period value of the Valero shares.
Q5. If some of my shares are converted into the form of consideration that I
didn't elect, will I be receiving less value at closing for those shares?
A5. No. All UDS stockholders will receive per share consideration that is of
equal value (when the stock component is valued based on the 10-day measure-
ment period before closing), whether they receive cash, Valero stock or a
combination.
Q6. Please provide some examples of how this would work.
A6. The following hypothetical examples (which are not intended to indicate what
the future price of Valero or UDS common stock may actually be) illustrate
the approach:
o Assume that the 10-day average Valero stock price at closing is the
same as the closing price on the NYSE on Friday, May 4, 2001 ($45.47).
UDS stockholders could elect to receive for each UDS share they own
either $55.42 in cash or 1.219 shares of Valero stock (which at that
price would have a value of $55.42), or a combination of the foregoing.
o Assume that the 10 day average Valero stock price at closing is $54.00.
UDS stockholders could elect to receive for each UDS share they own
either $60.66 in cash or 1.123 shares of Valero stock (which at that
price would have a value of $60.66), or a combination of the foregoing.
o Assume that the 10 day average Valero stock price at closing is $41.00.
UDS stockholders could elect to receive for each UDS share they own
either $52.67 in cash or 1.285 shares of Valero stock (which at that
price would have a value of $52.67), or a combination of the foregoing.