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Delek US Holdings to Acquire Alon USA Partners in All-Stock Deal

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Delek to acquire remaining outstanding shares

On November 8, 2017, Alon USA Partners (ALDW) announced it has entered into a merger agreement with Delek US Holdings (DK) in which Delek will acquire all the outstanding ALDW shares that it doesn’t already own. It will be an all-stock transaction. Delek already owns 81.6% of ALDW’s outstanding shares.

Under the terms of the agreement, Alon USA Partners shareholders will receive 0.49 Delek US Holdings shares for each common share of ALDW. That implies a 2.9% premium to ALDW’s closing price of $13.52 on November 7, 2017, the day before the transaction was announced. It’s a 5% premium to the 30-trading day volume weighted average ratio of 0.47 through November 7, 2017. The transaction is expected to close in 1Q18.

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Rationale

In July 2017, Delek US Holdings completed a merger with Alon USA Energy, ALDW’s parent company at the time. The acquisition of ALDW is a strategic next move, according to the company.

Explaining the benefits of the merger, Ezra Uzi Yemin, chair, president, and chief executive officer of Delek US Holdings, said, “It should allow us to simplify our corporate structure, reduce public company costs, reallocate cash flow from distributions to growth investments and enable us to efficiently dropdown logistics assets to Delek Logistics Partners in the future. In addition, we should be able to move forward to capture cost of capital synergies as we utilize the balance sheet of Delek US to refinance high cost debt at Alon Partners.”

The benefits to Alon USA Partners shareholders include ownership in a larger, more diverse company. Alon USA Partners stock has risen nearly 40% year-to-date. In comparison, the Alerian MLP ETF (AMLP) has fallen ~14% over the same period.

CVR Refining (CVRR) reported its 3Q17 results on November 1, 2017. For details, read CVR Refining Reported Strong 3Q17 Results, Stock Rose 11%.

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