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Tesoro-Western Refining $6.4B Merger Okayed by Shareholders

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Downstream operators Tesoro Corporation and Western Refining, Inc. investors have approved their $6.4 billion merger and acquisition deal. The companies are expecting the transaction to be completed by the first half of 2017.

About 99% Tesoro investors and 80% Western Refining shareholders have voted in favor of the deal.  In Nov 2016, Tesoro first announced its plans to acquire Western Refining. Stockholders of the acquiree have been offered $37.30 per share or 0.435 shares of Tesoro common stock for each Western Refining share held. After the completion of the acquisition, however, Tesoro is expected to increase the number of authorized shares of its common stock from 200 million to 300 million.

The merged company is expected to garner $325–$425 million in synergies, generating substantial stockholder value.

The merger depends on the fulfillment of customary closing conditions. This includes the expiration or termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976.

Companies’ Backgrounds

Tesoro was founded in 1968. The company, which is primarily engaged in petroleum exploration and production, began operating as Alaska's first refinery near Kenai in 1969. Today, Tesoro is a FORTUNE 500 company and one of the largest independent petroleum refiners and marketers in the Western U.S. The company is headquartered in Texas.

Western Refining is an independent crude oil refiner. The company is also a marketer of refined products and operates, primarily in the Southwestern region of the U.S., including Arizona, New Mexico, and West Texas. This company is also headquartered in Texas.

Price Performances

For the last two years, Tesoro’s shares have been outperforming the Oil and Gas - Refining and Marketing Industry. During this period, the industry registered a decrease of 12.93%, whereas Tesoro’s stock lost 11.91%. Over this period, Tesoro witnessed its shares gaining a maximum of 29.72%, while the industry’s highest increase was of 9.85%.

Zacks Rank and Stocks to Consider

Both Tesoro and Western Refining carry a Zacks Rank #3 (Hold).  Some better-ranked stocks from the same space include Par Pacific Holdings, Inc. (PARR - Free Report) and Cenovus Energy Inc. (CVE - Free Report) . Both Par Pacific and Cenovus sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

In the current quarter, Par Pacific’s sales are estimated to grow 46.10% year over year. The company had a positive earnings surprise of 666.67% in the last quarter of 2016.

For the current quarter, Cenovus’ sales are likely to increase 96% year over year. In the last quarter of 2016, the company had a positive earnings surprise of 583.33%.

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