Refiner to Buy Rival in $1.23-Billion Deal

Western Refining Inc. said Monday that it was buying Giant Industries Inc. for $1.23 billion in cash, creating the fourth-largest publicly traded independent oil refiner in the U.S.

The combined company will have the capacity to handle about 216,000 barrels a day from four refineries. That is about 84% more than Western’s current capacity.

Western already has a refinery in El Paso, where it is based. The deal will give it an East Coast presence with a refinery in Yorktown, Va., and two refineries in northern New Mexico.

In addition to its refineries, Giant Industries, based in Scottsdale, Ariz., owns a crude oil gathering pipeline system based in Farmington, N.M., a fleet of crude oil and finished-product truck transports and a chain of retail service station and convenience stores in New Mexico, Colorado and Arizona. It also is the parent company of Phoenix Fuel Co. and Dial Oil Co., both of which are wholesale petroleum products distributors.

Chief Executive Paul Foster said the deal, expected to close in the fourth quarter pending regulatory approvals, was likely to save the new company about $20 million annually. But no job losses are expected.

A transition team of executives from both companies will organize to review how best to integrate the two companies’ operations and report back in nine to 12 months, he said.

Giant Chairman Fred Holliger will serve as a special advisor to the Western board.

Foster said his company approached Giant about an acquisition early this summer.

Under the terms of the deal, Western Refining will pay $83 a share for Giant. That represents a 16% premium over Giant’s share price of $71.79 at the close of trading Friday.

Western Refining will also assume $275 million in debt in the deal.

Giant Industries shares rose $10.43, or 14.5%, to $82.22. Western Refining shares fell 85 cents, or 3.3%, to $25.14.