Western Refining (WNR) cut the price it will pay for Giant Industries (GI) by $6, to $77 a share in cash.

The El Paso, Texas, refiner cited a recent fire at Giant's Yorktown refinery, which forced Giant's ultra low sulfur diesel processing unit to be shut down, a separate fire at Giant's Ciniza refinery, and the resulting increased costs and modified terms associated with Giant's insurance coverage.

The move cuts the value of the all-cash deal to $1.4 billion from $1.5 billion. The companies announced the deal in August.

"We remain excited about the merger and believe that our combination with Giant continues to provide a number of strategic and financial benefits," Western said. "The revised terms announced today recognize the financial impact of these unexpected events. We look forward to closing the transaction and realizing the opportunities ahead."

Western continues to expect the transaction with Giant to result in refinery efficiencies and cost savings of approximately $20 million annually starting in 2008. Western also continues to expect that the transaction will be immediately accretive to Western's earnings per share, excluding one-time transaction costs.

Closing of the transaction is subject to approval by Giant shareholders and the satisfaction of other closing conditions, including expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act. The transaction is currently expected to close in the first quarter of 2007 and is not subject to any financing conditions.

Giant's ultra low sulfur diesel processing unit at its Yorktown refinery is expected to be fully operational by mid-February 2007, and Giant's Ciniza refinery is expected to be fully operational by mid-December 2006.

Giant fell $4.95 to $76, while Western rose 94 cents to $25.94.