Two private equity firms have cashed out their controlling stake in the company that owns the St. Paul Park refinery and SuperAmerica stores for $775 million.
The two firms, Acon Investments and TPG, sold their interests in Northern Tier Energy to Western Refining, a publicly traded oil company based in El Paso, Texas. The deal was signed, closed and announced Tuesday.
Western Refining, which owns two refineries in Texas and New Mexico and 221 Howdy’s and Giant convenience stores in that region, paid $245 million in cash and financed the rest with senior debt.
That gives Western a controlling stake in Northern Tier as the general partner and holder of 38.7 percent of its limited partnership units. The rest of the variable-pay units are publicly traded.
Western said no immediate changes are planned in the management of the Northern Tier assets, which are mostly in Minnesota and include a stake in pipelines that deliver North Dakota and Canadian crude oil from a Clearbrook, Minn., oil terminal to the Twin Cities. Northern Tier’s headquarters will remain in Ridgefield, Conn.
“In the short term, it’s pretty much business as usual,” said Gary Hanson, vice president for corporate communications at Western.
Northern Tier was formed in 2010 as Acon and TPG purchased the St. Paul Park refinery, the SuperAmerica chain and other assets from Marathon Oil Corp. for $900 million. It later sold and leased back 135 SuperAmerica stores for $248 million.
Investors reacted warmly to the deal. Western shares closed up $3.04, or 9 percent, at $36.14. Northern Tier units rose 76 cents or 3.3 percent to $24.02.
Hanson said Western and Northern Tier have similar business strategies focused on access to favorably priced crude oil. He said Western, founded in 2000, benefits from trucking operations and pipelines supplying its El Paso refinery with crude from the nearby Permian Basin in west Texas. A second refinery in Gallup, N.M., is in the San Juan Basin, another oil play.
Similarly, Northern Tier’s St. Paul Park refinery benefits from often-favorable pricing on North Dakota and Canadian crude oil. The two companies have a joint refining capacity of 242,500 barrels per day.
Both companies also have retail operations. Northern Tier has 163 company-operated SuperAmerica stores and services 74 franchised ones in Minnesota and Wisconsin. Western’s Howdy’s and Giant convenience stores are in Texas, New Mexico, Arizona and Southern California, and sell gasoline under various oil company brands.
Northern Tier CEO Hank Kuchta didn’t want to take questions about the deal on the company’s third-quarter earnings conference call with analysts Tuesday, but got a couple anyway.
“You have to leave it to your imagination what the benefits can be from the two companies put together,” Kuchta told analysts.
For its third quarter, Northern Tier reported net income of $27 million compared with $61 million a year ago, a decline blamed on lower refining margins and a 7 percent drop in production from a fire-related outage at the St. Paul Park refinery. The company said investors would get 31 cents per unit for the quarter.