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Tesoro to buy Western Refining for about $4.1 billion

Tesoro is investing in crude-by-rail infrastructure, taking recent delivery of new tank cars at the Port of Vancouver in Washington. These DOT-120 tank cars will be among the first next-generation models to hit the tracks.
Karen Stern | CNBC
Tesoro is investing in crude-by-rail infrastructure, taking recent delivery of new tank cars at the Port of Vancouver in Washington. These DOT-120 tank cars will be among the first next-generation models to hit the tracks.

U.S. oil refiner Tesoro said on Thursday it would buy Western Refining Inc for $4.1 billion to add refineries in Texas, New Mexico and Minnesota.

The combined company will have refining capacity of over 1.1 million barrels per day. Tesoro has refineries in California, Washington, Alaska, Utah and North Dakota.

Western Refining shareholders will get 0.4350 Tesoro shares for each share they own, or $37.30 in cash. The offer is a 22.3 percent premium to Western Refining's Wednesday close.

The total deal is valued at about $6.4 billion, including about $1.7 billion of Western Refining's debt and $605 million for a non-controlling interest in Western Refining Logistics.

The combination of the two refiners will create $350 million to $425 million in synergies, which are expected to be realized within the first two years, the companies said.

The deal is expected to close in the first half of 2017.

Goldman, Sachs is advising Tesoro and some of its affiliates are providing committed financing. Sullivan & Cromwell is Tesoro's legal adviser. Barclays is Western Refining's adviser and Davis Polk & Wardwell is its legal adviser.