
2.	ACQUISITIONS AND DISPOSITIONS

Meraux Acquisition

On October 1, 2011, we acquired the Meraux Refinery and related logistics assets for an initial payment of $586 million, including inventories of $261 million, from Murphy Oil Corporation, with the total purchase price funded from available cash. We expect to receive a favorable adjustment related to inventories in the fourth quarter of 2011 that will reduce the purchase price by approximately $40 million. The Meraux Refinery has a total throughput capacity of 135,000 barrels per day and is located in Meraux, Louisiana. This acquisition is referred to as the Meraux Acquisition.

The Meraux Acquisition is consistent with our general business strategy and complements our existing refining and marketing network.

A determination of the acquisition-date fair values of the assets acquired and the liabilities assumed in the Meraux Acquisition is pending the completion of an independent appraisal and other evaluations. Disclosure of pro forma information for the Meraux Acquisition for the three and nine months ended September 30, 2011 and 2010 is impracticable as historical financial information is not readily available at this time.

Pembroke Acquisition

On August 1, 2011, we acquired 100 percent of the outstanding shares of Chevron Limited from a subsidiary of Chevron Corporation (Chevron), and we subsequently changed the name of Chevron Limited to Valero Energy Ltd. Valero Energy Ltd owns and operates the Pembroke Refinery, which has a total throughput capacity of approximately 270,000 barrels per day and is located in Wales, United Kingdom. Valero Energy Ltd also owns, directly and through various subsidiaries, an extensive network of marketing and logistics assets throughout the United Kingdom and Ireland. On the acquisition date, we initially paid $1.8 billion from available cash, of which $1.1 billion was for working capital. Subsequent to the acquisition date, the amounts paid have been favorably adjusted for working capital true-up adjustments (primarily inventory), with an adjusted purchase price of $1.675 billion, as outlined below. We expect final settlement by year end. This acquisition is referred to as the Pembroke Acquisition.

The Pembroke Acquisition is consistent with our general business strategy and broadens the geographic diversity of our refining and marketing network.

The purchase price for the Pembroke Acquisition has been preliminarily allocated based on estimated fair values of the assets acquired and liabilities assumed at the acquisition date, pending the completion of an independent appraisal and other evaluations. The preliminary purchase price allocation as of September 30, 2011 was as follows (in millions):



Current assets, net of cash acquired	$	2,217
Property, plant and equipment	777
Deferred charges and other assets	17
Intangible assets	50
Current liabilities, less current portion of debt and capital lease obligations	(1,294		)
Debt and capital leases assumed, including current portion	(12		)
Other long-term liabilities	(77		)
Noncontrolling interest	(3		)
Purchase price, net of cash acquired	$	1,675

The acquired intangible assets are subject to amortization and have preliminary estimated useful lives of 15 years. These acquired intangible assets have been preliminarily assigned to the major intangible asset classes of royalties and licenses and wholesale dealer agreements.

During the three and nine months ended September 30, 2011, we recognized $18 million and $23 million, respectively, of costs related to the Pembroke Acquisition. These costs were expensed and are included in general and administrative expenses.

Our consolidated statements of income include the results of operations of the Pembroke Acquisition commencing on August 1, 2011. The operating revenues and income from continuing operations associated with the Pembroke Acquisition included in our consolidated statements of income for the three and nine months ended September 30, 2011, were as follows (in millions):



	Three Months Ended September 30,			Nine Months Ended September 30,
	2011		2010	2011		2010
Operating revenues	$	3,028	N/A	$	3,028	N/A
Income from continuing operations	19		N/A	19		N/A

The following pro forma financial information (in millions, except per share amounts) presents our consolidated results assuming the Pembroke Acquisition occurred on January 1, 2010. The pro forma financial information is not necessarily indicative of the results of future operations.



	Three Months Ended September 30,				Nine Months Ended September 30,
	2011		2010		2011		2010
Operating revenues	$	35,491	$	24,594	$	103,030	$	70,638
Income from continuing operations attributable to Valero stockholders	1,196		306		1,941		767
Earnings per common share from continuing operations – basic	2.11		0.54		3.41		1.36
Earnings per common share from continuing operations – assuming dilution	2.10		0.54		3.39		1.35

Acquisition of Pipeline and Terminal Facilities

In June 2011, we acquired two product terminal facilities in Louisville and Lexington, Kentucky and a minority interest in the LouLex Pipeline system, which connects the terminal facilities, from a subsidiary of Chevron for cash consideration of $37 million. These assets provide storage and distribution facilities for our wholesale marketing business in eastern Kentucky, which is supplied primarily by our Memphis Refinery.

Because this acquisition was not material to our results of operations, we have not presented actual results of operations for this acquisition from the acquisition date through September 30, 2011 or pro forma results of operations for the three and nine months ended September 30, 2011 and 2010. The consolidated statements of income for the three and nine months ended September 30, 2011 include the results of this acquisition from its acquisition date.

Acquisitions of Ethanol Plants

In December 2009, we signed an agreement with ASA Ethanol Holdings, LLC to buy two ethanol plants located in Linden, Indiana and Bloomingburg, Ohio and made a $20 million advance payment towards the acquisition of these plants. In January 2010, we completed the acquisition of these plants, including certain inventories, for total consideration of $202 million.

Also in December 2009, we received approval from a bankruptcy court to acquire an ethanol plant located near Jefferson, Wisconsin from Renew Energy LLC and made a $1 million advance payment towards the acquisition of this plant. We completed the acquisition of this plant, including certain receivables and inventories, in February 2010 for total consideration of $79 million.

Disposition of Paulsboro Refinery

In December 2010, we sold our Paulsboro Refinery to PBF Holding Company LLC (PBF Holding) for total proceeds of $707 million, including $361 million from the sale of working capital, resulting in a pre-tax loss of $980 million ($610 million after taxes). The sale proceeds consisted of $547 million of cash and a $160 million note secured by the Paulsboro Refinery. The note matures in December 2011 and bears interest at LIBOR plus 700 basis points. PBF Holding has the option to extend the note for six months; however, the interest rate for the additional six months will be LIBOR plus 900 basis points.

The results of operations of the Paulsboro Refinery are reflected in discontinued operations, and selected results prior to its sale are shown below (in millions).



	Three Months Ended September 30, 2010			Nine Months Ended September 30, 2010
Operating revenues	$	1,195		$	3,559
Loss before income taxes	(18		)	(36		)

Disposition of Delaware City Refinery Assets and Associated Terminal and Pipeline Assets

In June 2010, we sold our shutdown Delaware City Refinery assets and associated terminal and pipeline assets to wholly owned subsidiaries of PBF Energy Partners LP (PBF) for $220 million of cash proceeds. The sale resulted in a gain of $92 million ($58 million after taxes) related to the shutdown refinery assets and a gain of $3 million related to the terminal and pipeline assets. The gain on the sale of the shutdown refinery assets resulted from the proceeds we received for the scrap value of the assets and the reversal of certain liabilities recorded in the fourth quarter of 2009 associated with the shutdown of the refinery, which we did not incur because of the sale, and this gain is presented in discontinued operations for the nine months ended September 30, 2010.

Results of operations of the Delaware City Refinery are reflected in discontinued operations, and selected results prior to its sale, excluding the gain on the sale, are shown below (in millions):



	Three Months Ended September 30, 2010		Nine Months Ended September 30, 2010
Operating revenues	$	—	$	—
Loss before income taxes	—		(33		)