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VALERO ENERGY CORP/TX 8-K Report, Material Agreement (Apr 25, 2005)

Filed April 25, 2005For Securities:VLO

Summary

Valero Energy Corporation (VLO) has announced a definitive agreement to merge with Premcor Inc. The transaction, structured as a merger of Premcor into Valero with Valero as the surviving entity, offers Premcor shareholders the choice of receiving either 0.99 shares of Valero common stock or $72.76 in cash for each Premcor share. This election is subject to proration, with approximately 50% of Premcor's fully diluted shares expected to be converted to cash and the remainder to Valero stock, to maintain the desired tax treatment for the merger. The merger is expected to be accounted for as a purchase and is intended to be a tax-free reorganization. Both companies' boards have approved the agreement, and consummation is contingent on customary closing conditions, including Premcor shareholder approval, regulatory clearance (including Hart-Scott-Rodino), and the accuracy of representations and warranties. The agreement includes standard covenants for interim business conduct and restrictions on Premcor seeking alternative transactions. A termination fee of $150 million is payable by Premcor under specific circumstances.

Key Highlights

  • 1Valero Energy Corp. (VLO) is acquiring Premcor Inc. in a definitive merger agreement.
  • 2Premcor shareholders can elect to receive either 0.99 shares of VLO common stock or $72.76 cash per Premcor share.
  • 3The merger will be subject to proration, aiming for approximately 50% cash and 50% stock consideration for Premcor shareholders.
  • 4The transaction is structured as a merger of Premcor into Valero, with Valero as the surviving corporation.
  • 5The deal is intended to qualify as a tax-free reorganization for Valero.
  • 6Consummation is subject to regulatory approvals, Premcor shareholder approval, and other customary closing conditions.
  • 7A termination fee of $150 million is stipulated under certain termination scenarios.

Frequently Asked Questions

This 8-K filing announces Valero Energy Corporation's entry into a definitive Agreement and Plan of Merger with Premcor Inc., detailing the terms of the proposed acquisition.

Premcor shareholders have the option to receive either 0.99 shares of Valero common stock or $72.76 in cash for each share of Premcor common stock they hold. However, this election is subject to proration, with roughly half of the shares expected to be converted to cash and the other half to Valero stock.

The merger is subject to several conditions, including the approval of Premcor shareholders, expiration or termination of the Hart-Scott-Rodino waiting period and other regulatory approvals, absence of any prohibitory laws or orders, accuracy of representations and warranties, and compliance with covenants.

If the Merger Agreement is terminated under specified circumstances, Premcor may be required to pay Valero a termination fee of $150,000,000.