DALLAS -- Southland Corp. Wednesday announced completion of the sale of its 50 percent stake in Citgo Petroleum Corp. for $661.5 million in cash to Venezuela's state-owned oil company which already owns the other half of Citgo.
Southland, which operates 7-Eleven stores, said net proceeds from the transaction will be used to reduce the debt incurred in the $4.9 billion leveraged buyout of Southland by its founding Thompson family in 1987.
'Citgo will continue to supply Southland's convenience retailing operations with high-quality, Citgo-brand gasoline under a long-term product purchase agreement,' Southland said.
The closing took place in Tulsa, Okla., where Citgo, the nation's eighth-largest refining and marketing company, is headquartered. In the first nine months of 1989, Citgo earned $104.4 million on revenues of $3.6 billion. In 1988, the company earned $165.6 million on revenues of $4.1 billion.
Petroleos de Venezuela (PDVSA) acquired its initial 50 percent interest in Citgo from Southland for $290 million in September 1986.
Southland bought Citgo in August 1983 from Cities Service, a subsidiary of Occidental Petroleum Co., in a $258 million transaction made up of cash and securities.
The intenton to sell the other half was first announced by Southland in November. At the time, Southland quoted the sale price at $675 million.
'That price was mentioned when we didn't have a letter of intent,' said Southland spokeswoman Markeeta McNatt. 'The $661.5 million was the final amount.'
Since the sale was announced, some published reports had suggested Venezuela, a leading member of the Organization of Petroleum Exporting Countries, may not proceed with the transaction becasue of its huge foreign debts.
Southalnd had insisted all along the sale would go through before the Jan. 31 deadline.
Kent Young, spokesman for Citgo in Tulsa, said the company currently employs about 3,300 people, including about 850 in Tulsa and 1,600 people in Lake Charles, La., where much of its operations are located.
Young said no staff reduction or job cuts are anticipated under the new owners. Pablo Reimpel, PDVSA's first vice president, would continue as chairman of Citgo, Young said. Ronald Hall, Citgo's president and chief executive officer, also will remain in his position.
PDVSA also owns 100 percent of Champlin Refining in Fort Worth, Texas, Young said. Additionally, the Venezuelan enterprise owns 50 percent of Unoven, a Chicago-based refinery. The other half of Unoven is owned by Unocal Inc. of Los Angeles.
PDVSA's acquisitions are part of Venezuela's strategy to shift its marketing strategy from being a mere crude oil producer to also being a refiner and marketer of petroleum products.
Kuwait is another OPEC member that has adopted this strategy of acquiring 'downstream' operations to ensure markets for its crude.
The Citgo sale is the latest in a series of divestitures Southland has undertaken to pay down its bank debt of $1.5 billion incurred as part of the total LBO debt of $4.9 billion.
Besides refining and marketing, Citgo also has substantial interest in a number of pipelines. It also owns 43 terminals, mostly in the eastern United States, and an additional 400 exchange terminals.
