moved quickly Thursday to buy 1,740 of
2,431 gas stations freed under the
Federal Trade Commission's
The Stamford, Conn.-based oil refiner paid about $860 million for the stations, located primarily in the Northeast and the Mid-Atlantic states, for a price, some analysts say, that was lower than they expected.
"The Exxon Mobil sites are very high-quality locations," Thomas D. O'Malley, Tosco's chairman and chief executive officer, said in a statement. "We are excited to be adding this outstanding network to our existing system of over 4,500 gasoline and convenience outlets throughout the U.S."
"I thought it would go for more than that," said Bill Hyler, an analyst at
CIBC World Markets
, who rates the stock a buy. His firm has done no recent underwriting for any of the companies involved. "Normally you'd expect $500,000 per station. Given the quality and locations of these stations, you might expect more." Using Hyler's approximation, the expected price would have been at least $870 million.
Shares of Tosco rallied 1 3/4, or 6%, to close at 29 1/4. Exxon Mobil slid 15/16, or 1%, to close at 81 9/16.
On Tuesday, the FTC
approved the $81 billion merger between
after a yearlong period of scrutiny. The FTC granted the merger provided the joined company, among other things, would sell more than 2,400 gas stations of its nearly 16,000 stations within nine months.
The deal is debt financed, Hyler said, "so it's immediately accretive to Tosco earnings." Transactions financed in stock or cash often cut into near-term earnings.
A company spokesperson said the stations would not be re-branded for at least 10 years. This way, Tosco can leverage the Mobil and Exxon brand names while profiting from gas sales at the stations. Consequently, Tosco won't incur major rebuilding expenses in the transaction.
Tosco expects its two large refineries on the East Coast to supply the new stations. Together these refineries produce 19 million gallons of oil products each day.
"It was a good move to take away the chance these assets will be snatched up by its competitors," said Chris Stavros, an analyst at
, who rates the stock attractive. PaineWebber has done no recent underwriting for either company in the transaction.
were also interested in pumping up their East Coast presence by acquisition of the recently divested gas stations, according to Stavros.
Tosco has been aggressively weighing its opportunities and taking advantage of some over the past few years, taking in the West Coast petroleum business of
and supplying gas to 500
gas stations acquired in a refinery deal.
"Tosco has such a good balance sheet that they will continue to build their downstream refining, marketing business," Hyler adds.
Most likely they would pursue quality assets in the Gulf Coast region, he said. The company, however, would most likely not bid for any
properties in the Northwest, where it already has a strong presence, Hyler noted.