Ultramar Diamond Shamrock and Phillips Petroleum signed a letterof intent to combine all of the operating assets of UltramarDiamond Shamrock and the North American refining, marketing, andtransportation (RM&T) operations of Phillips into a jointventure company named Diamond 66. The deal will not affect Phillipsnatural gas activities, a spokeswoman said.
The new company will become the largest independent RM&Tcompany in North America. Under the terms of the letter of intent,Ultramar Diamond Shamrock will own 55% and Phillips will own 45% ofDiamond 66. In addition, Phillips will get $500 million from thejoint venture company upon closing of the transaction and anadditional $300 million cash distribution one year from closing.The transaction is expected to generate incremental cost andproductivity synergies of more than $250 million in the secondyear. The venture is expected to produce annual capital savings ofat least $50 million. As a result, the joint venture will beaccretive to the earnings and cash flow of both Ultramar DiamondShamrock and Phillips in the first year, with more accretion in thefollowing years.
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