Antitrust Law Daily Wrap Up, ANTITRUST NEWS: FTC Clears Tesoro’s Acquisition of BP Gasoline Refining Assets, (May 17, 2013)

The FTC has closed its investigation into Tesoro Corporation’s acquisition of southern California gasoline marketing and refining assets from BP p.l.c., concluding that the transaction would not be likely to substantially reduce competition in the market for California-grade gasoline, the FTC announced today. The Commission sent letters to the counsel for Tesoro and BP informing them of the close of the investigation, but noting that it reserved the right to take further action if necessary.

According to an FTC statement, the FTC had previously challenged several acquisitions in the market for California-grade gasoline during the 1990s and 2000s. These experiences led the FTC to conduct a nine-month investigation of the proposed Tesoro-BP transaction.

However, the FTC observed that conditions in the market had changed in the intervening years. Whereas the previous transactions occurred at a time when the West Coast refineries operated near capacity, and would have great difficulty responding to a strategic reduction in the supply of the gasoline, the market now contained significant excess capacity. Increased vehicle fuel efficiency and the rise of renewable fuels, among other factors, had led to a decline in demand for the gasoline and was projected to continue to do so.

Although the acquisition would “modestly” increase the market concentration, the transaction would not reduce the number of West Coast gasoline refining companies, since BP would retain a refinery in Washington. The FTC also had reason to believe that the combination of Tesoro’s existing Southern California refining assets with those obtained from BP would reduce the costs of manufacturing gasoline, and would therefore be unlikely to result in higher prices for consumers.

Tesoro statement. Tesoro issued a press release announcing the FTC’s clearance of the transaction, which includes an asset purchase price of $1.075 billion and the purchase of inventory at a market value currently estimated at $1.3 billion. Tesoro expects the deal to create significant “synergies” in its gasoline production and oil sourcing.

In addition to the refining assets, the transaction includes about 800 dealer operated retail stations in Southern California, Nevada, and Arizona; the well-established ARCO brand and associated registered trademarks; and a master franchisee license for the ampm convenience store brand, as well as 51% ownership in a 400 megawatt gas supplied electricity cogeneration facility and a 350,000 metric ton per year anode coke calcining operation, according to the press release.

“We are pleased the FTC has concluded its review and we can close this transformational acquisition as planned,” said Greg Goff, Tesoro’s President and CEO. “This transaction is a unique opportunity for Tesoro to combine the best aspects of two West Coast refining, marketing and logistics businesses resulting in a more efficient world-scale integrated refining, marketing and logistics system.”

Companies: Tesoro Corporation; BP p.l.c.

News: Antitrust FederalTradeCommissionNews