Newspaper article THE JOURNAL RECORD

Ultramar to Buy Diamond Shamrock

Newspaper article THE JOURNAL RECORD

Ultramar to Buy Diamond Shamrock

Article excerpt

SAN ANTONIO -- Ultramar Corp. said it will buy Diamond Shamrock Inc. for about $1.96 billion in stock and assumed debt, giving the two a commanding share of the retail gasoline market in the U.S. Southwest.

Ultramar Diamond Shamrock will have more than 4,400 retail outlets in the U.S. and Canada and more than $8 billion a year in revenue, compared with about $10 billion for rival Tosco Corp., which earlier this year bought the 2,500-store Circle K convenience-store chain.

Diamond Shamrock, based in San Antonio, refines oil and sells gasoline in the Southwest through about 2,700 Corner Store, Stop N Go and Diamond Shamrock stores in nine states. It has the best-selling gasoline in Texas and is No. 2 in Colorado and New Mexico. Ultramar, which is based in Greenwich, Conn., refines oil and sells gasoline in California. It also sells gas and heating oil in eastern Canada and New England. Its gasoline brands are Ultramar, Beacon and Sergaz. "This merger will position the new company for greater penetration of attractive western U.S. markets, including Arizona, California and Nevada," said Roger Hemminghaus, Diamond Shamrock's chairman and chief executive officer. The two companies said the merger is projected to bring cost savings of $25 million in 1997 and $75 million a year by 1998 through the reduction of overhead and administrative costs. Ultramar has about 4,000 employees and Diamond Shamrock has more than 13,000. About 200 employees will be laid off as a result of the merger, with many of the job cuts coming in California. The new company will be based in San Antonio. Jean Gaulin, chairman and chief executive of Ultramar, said Diamond Shamrock's large retail network and presence in the Southwest complement Ultramar's refining and marketing. Ultramar operates two refineries -- one in California and the other in Canada -- with a combined capacity of 250,000 barrels a day. Diamond Shamrock has two refineries in Texas with daily capacity of 225,000 barrels. "This combination makes a great deal of sense in my mind both from a strategic and a competitive point of view," said Doug Terreson, an oil analyst at Morgan Stanley. …

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