- Delek US Holdings (DK -1.8%) and Alon USA Energy (ALJ -0.1%) are initiated with Buy ratings, with respective $23.50 and $10 price targets, at Citigroup, which says a potential merger of the two companies seems increasingly likely and could unlock value.
- DK already owns a 48% stake in ALJ and recently sold its retail assets to COPEC, raising sufficient funds to acquire the remaining 52% stake via cash, Citi says.
- Besides the synergies in procurement of crude and marketing of products, the firm says the clearest synergy is $71M that ALJ outlined in EBITDA that could be dropped into DK’s MLP, a value that alone represents 100% of ALJ’s market cap.