Valero to Sell Paulsboro Oil Refinery to PBF Energy

PBF Energy Company LLC, the partnership backed by private-equity firms Blackstone Group LP and First Reserve Corp., agreed to purchase Valero Energy Corp.’s Paulsboro refinery in New Jersey for about $360 million.

PBF is also covering certain expenses at the refinery and buying its crude and fuel inventories, estimated to be another $275 million, according to a statement issued today by San Antonio-based Valero. The refinery, capable of handling 185,000 barrels a day, is the second purchased from Valero this year by PBF, which was formed in 2008 to buy U.S. refineries.

U.S. fuel-makers have struggled the past few years, as narrowing refining margins have eroded profits, said Philip Weiss, an analyst at Argus Research in New York who has a “buy” rating on Valero shares and doesn’t own any.

“It seems like a reasonable price,” Weiss said of the Paulsboro sale. “In this environment, they’re not going to get a great price.”

Overcapacity at U.S. refineries pushed Valero to sell some of its less profitable plants, rather than invest in upgrades, said Weiss.

PBF agreed in April to buy Valero’s Delaware City, Delaware, plant for $220 million. The company said when it purchased the Delaware City refinery that it would spend $125 million to $150 million to improve the 182,200-barrel-a-day plant. PBF has scheduled maintenance to begin this summer to refurbish the refinery fully before it restarts.

Delaware City Refinery

The Paulsboro facility, located about 10 miles (16 kilometers) from Philadelphia, has “tremendous synergies with the Delaware City refinery,” Thomas O’Malley, chairman of PBF, said in a statement today. “Once Delaware City reopens, PBF will have over 375,000 barrels per day of refining capacity within a 35-mile radius.”

Private-equity firms like Blackstone and First Reserve pool money from investors to take over companies, financing the purchases mostly with debt with the intention of selling them later for a profit. The firms formed PBF with Petroplus Holdings AG, Europe’s largest independent refiner.

Petroplus said yesterday it has an agreement in principle to sell its 32.6 percent share of PBF to Blackstone and First Reserve for $91 million. Petroplus, based in Zug, Switzerland, said in a statement it was exiting in part because of PBF’s plans to “expand at a rapid rate” in the U.S., which would require raising more capital in a “difficult financial environment” or lowering its ownership interest.

Petroplus won’t be contributing to the Paulsboro purchase, Michael Gayda, a spokesman for Greenwich, Connecticut-based PBF, said in an interview.

To contact the reporters on this story: Noah Buhayar in New York at nbuhayar@bloomberg.net; Paul Burkhardt in New York at pburkhardt@bloomberg.net

To contact the editor responsible for this story: Susan Warren at susanwarren@bloomberg.net.

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