WNR buying Northern Tier Energy WSJ REPORT- Opinions?
Western Refining Inc. WNR +2.03% is planning to buy a controlling stake in Northern Tier Energy NTI +2.60% LP, said people familiar with the matter, as it seeks to capitalize on a rise in U.S. oil production.
Western Refining, based in El Paso, Texas, would buy a 38.7% stake in Northern Tier owned by private-equity firms TPG and Acon Investments Ltd. for roughly $775 million, the people said. As part of the deal, Western Refining would get 100% of the so-called general partner that controls Northern Tier, they said.
Assuming it doesn't fall apart at the last minute, the deal could be announced Tuesday, the people said.
It is unclear how much Western Refining is paying per ownership unit, or share, but it appears to be a discount to the current market price of Northern Tier, which is based in Ridgefield, Conn. Northern Tier rose 2.6% to $23.26 in New York Stock Exchange trading Monday.
Buying Northern Tier would hand Western Refining a St. Paul Park, Minn., refinery located near the prolific Bakken Shale deposit in North Dakota. Increased production there and elsewhere has put downward pressure on U.S. oil prices, in turn increasing margins for local refiners—who buy crude and turn it into products such as gasoline. Western Refining also owns facilities near the Permian Basin in Texas and New Mexico.
Northern Tier is structured as a so-called master-limited partnership, a dividend-paying investment vehicle that enjoys special tax breaks and is often used by natural-resource companies.
The company also operates a chain of gasoline stations in Minnesota and Wisconsin. TPG and Acon bought the company from Marathon Oil Corp. MRO -0.27% for around $600 million in 2010 and took it public in 2012.
TPG has been active in the energy sector this year, striking deals including the $3.2 billion sale of Copano Energy LLC to Kinder Morgan Energy Partners KMP -0.16% LP. Returns on energy deals for the big private-equity firm have improved of late after its disastrous megabuyout of what was then known as TXU Corp. in 2007.
TPG teamed with KKR KKR -1.50% & Co. and Goldman Sachs Group Inc. GS +0.41% 's private-equity arm to buy TXU, now called Energy Future Holdings Corp., for $32 billion and about $13 billion in assumed debt. Falling natural-gas prices caused the Dallas-based power company to bleed cash and it is now negotiating with creditors on plans for a bankruptcy-protection filing