Valero Rises on Report of Takeover by India’s Reliance
Valero Energy Corp. (VLO), the largest independent refiner in the U.S., rose the most in almost three years after a newspaper report said Indian manufacturer Reliance Industries Ltd. (RIL) is poised to launch a $48-a-share cash bid for the company.
Valero rose 15 percent to close at $25.15 in New York, the most since Nov. 21, 2008. The potential offer, reported in the U.K.’s Daily Mail newspaper, would value San Antonio-based Valero at over $27 billion, more than double its market value of $12.5 billion at the close yesterday in New York.
Some investors who may not find a Reliance bid credible are increasing their holdings because Valero trades at a discount to many other energy companies, Sam Margolin, a refining analyst with Global Hunter Securities LLC in New York, said in a telephone interview today.
“It’s not that people believe it’s going to happen, it’s just one of those things where everybody knows Valero is cheap,” he said.
Valero is trading at a value of roughly two times earnings before interest, taxes, depreciation and amortization, making the company an ideal takeover target, Margolin said.
Valero declined comment on the report, Bill Day, a company spokesman said.
“We just think by any metric, our stock is just not being appreciated,” Valero Chief Executive Officer Bill Klesse told investors in a presentation Sept. 8.
Reliance has sought to boost its refining capacity and its energy footprint in the North America, buying stakes in three shale-gas projects in the U.S. and making failed bids for LyondellBasell Industries NV (LYB) and Value Creation Inc., a Canadian oil sands company.
To contact the reporter on this story: Bradley Olson in Houston at bradleyolson@bloomberg.net
To contact the editor responsible for this story: Susan Warren at susanwarren@bloomberg.net
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