Filed by Valero Energy Corporation
Pursuant to Rule 425 under the Securities Act of 1933
and deemed filed pursuant to Rule 14a-12
under the Securities Exchange Act of 1934
Subject Company: Valero Energy Corporation
Registration No. 333-61756
The following information was posted to Valero Energy Corporation's web site on
July 26, 2001:
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VALERO/UDS VALERO/UDS DEAL PRICING MECHANISM
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o In May, 2001 Valero Energy and Ultramar Diamond Shamrock agreed to a
part-cash/part-stock merger in which Valero would exchange all of the
shares of UDS for consideration with a value representing a 31.3%
premium to UDS' stock price, based on the average closing price of UDS
for the 10 day period prior to April 26th.
o The total consideration equates to $27.50 in cash and a fixed
exchange ratio of 0.614 Valero shares for each outstanding share of
UDS common stock, representing an aggregate consideration of
approximately $2 billion in cash plus approximately 44.4 million
Valero shares (subject to possible adjustment as described below).
o A UDS stockholder can elect to receive consideration in the form of
cash, Valero stock or a combination. Whatever the form, the mechanism
is designed such that the per-share consideration will have the same
value, based on the average price of Valero common stock during a 10
day measurement period ending 3 days before closing, regardless of the
form of consideration. That per-share value, whether paid in the form
of stock or cash, will be the sum of (a) $27.50 and (b) the average
value of 0.614 Valero shares during the measurement period.
o The elections will be subject to proration, as the total number of
Valero shares to be issued and the total amount of cash to be paid in
the merger to UDS stockholders as a group are each fixed except that
Valero may add more stock, valued at the measurement period value and
in lieu of an equivalent amount of cash, if needed to maintain the
tax-free treatment of the merger. If stock is oversubscribed, then UDS
stockholders who have elected stock will nevertheless receive cash for
some of their UDS shares, on a pro rata basis, and vice versa if cash
is oversubscribed. Also, if based on the average price of Valero stock
during the measurement period the limit on the percentage of UDS
shares that may be converted to stock consideration is greater than
50%, Valero at its option, may reduce that limit to 50%.
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VALERO/UDS EQUALIZATION MECHANISM
MM,EXCEPT PER SHARE FIGURES
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TRANSACTION STRUCTURE
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Total UDS Shares 72.3
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CASH PORTION (VALUE OF $55.00 OFFER AT 50%) STOCK PORTION (VALUE OF 1.228X OFFER AT 50%)
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Cash Offer per Share $27.50 Stock Exchange Ratio 0.614x
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Cash Offered in Transaction ($27.50 x 72.3 Shares) $1,988 Number of Valero Shares (0.614 x 72.3 Shares) 44.4
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TOTAL PERCENT PERCENT SHARES
STOCK BLENDED TOTAL VALUE TOTAL OF UDS TOTAL OF UDS ISSUED CASH REDUCED
VALERO CASH EXCHANGE VALUE TRANSACTION CASH OF STOCK CONSIDERATION SHARES SHARES SHARES TO MAINTAIN BY ISSUING
SHARE VALUE RATIO AT VALUE PER OFFERED OFFERED BY OFFERED BY PURCH. OFFERED PURCHASED 43% DEAL ADDITIONAL
PRICE AT 50% AT 50% 50% UDS SHARE BY VALERO VALERO CASH BY FOR VALERO VALUE IN SHARES
VALERO VALERO STOCK STOCK
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$25.00 $27.50 0.614x $15.35 [$42.85] $1,766 $1,332 $3,098 57.0% 53.3 43.0% 8.9 $222.4
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30.00 27.50 0.614x 18.42 [45.92 ] 1,892 1,428 3,320 57.0% 47.6 43.0% 3.2 95.8
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33.73* 27.50 0.614x 20.71 [48.21] 1,988 1,498 3,486 57.0% 44.4 43.0% -- --
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35.00 27.50 0.614x 21.49 [48.99] 1,988 1,554 3,542 56.1% 44.4 43.9% -- --
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40.00 27.50 0.614x 24.56 [52.06] 1,988 1,776 3,764 52.8% 44.4 47.2% -- --
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45.00 27.50 0.614x 27.63 [55.13] 1,988 1,998 3,986 49.9% 44.4 50.1% -- --
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50.00 27.50 0.614x 30.70 [58.20] 1,988 2,220 4,208 47.3% 44.4 52.7% -- --
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A B C D E F G H I J K L M
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=AxC =B+D =$1,988-M =AxJ =F+G =F/H =44.4+L =G/H =LxA
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NOTES:
o Assumes at least 43% of the consideration will be required to be paid in
Valero stock in order to maination the tax free status of the transaction with
respect to the stock consideration. Pursuant to the terms of the merger
agreement, the minimum percentage required to be paid in stock will not be
determinded until closing and may be higher or lower than the assumption made
for this example.
o $33.73 represents the breakeven price below which additional stock may be
issued to preserve tax-free treatment.
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VALERO/UDS VALERO/UDS DEAL PRICING MECHANISM
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STATEMENTS CONTAINED IN THIS PRESS RELEASE THAT STATE THE COMPANY'S OR
MANAGEMENT'S EXPECTATIONS OR PREDICTIONS OF THE FUTURE ARE
FORWARD-LOOKING STATEMENTS INTENDED TO BE COVERED BY THE SAFE HARBOR
PROVISIONS OF THE SECURITIES ACT OF 1933 AND THE SECURITIES EXCHANGE
ACT OF 1934. IT IS IMPORTANT TO NOTE THAT THE COMPANY'S ACTUAL RESULTS
COULD DIFFER MATERIALLY FROM THOSE PROJECTED IN SUCH FORWARD-LOOKING
STATEMENTS.
INVESTORS AND SECURITY HOLDERS ARE URGED TO READ THE JOINT PROXY
STATEMENT/PROSPECTUS THAT WILL BE SENT TO VALERO AND UDS STOCKHOLDERS
REGARDING THE PROPOSED MERGER, WHEN IT BECOMES AVAILABLE, BECAUSE IT
WILL CONTAIN IMPORTANT INFORMATION. THE JOINT PROXY
STATEMENT/PROSPECTUS WILL BE FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION BY VALERO AND UDS. INVESTORS AND SECURITY HOLDERS MAY
OBTAIN A FREE COPY OF THE JOINT PROXY STATEMENT/PROSPECTUS, WHEN IT IS
AVAILABLE, AND OTHER DOCUMENTS FILED BY VALERO AND UDS WITH THE
COMMISSION AT THE COMMISSION'S WEB SITE AT WWW.SEC.GOV. THE JOINT
PROXY STATEMENT/PROSPECTUS AND THESE OTHER DOCUMENTS MAY ALSO BE
OBTAINED, WHEN AVAILABLE, FREE OF CHARGE FROM VALERO AND UDS.
STOCKHOLDERS SHOULD READ THE DEFINITIVE JOINT PROXY
STATEMENT/PROSPECTUS CAREFULLY BEFORE MAKING A DECISION CONCERNING THE
MERGER.
VALERO AND UDS, AND THEIR RESPECTIVE DIRECTORS, EXECUTIVE OFFICERS AND
CERTAIN OTHER OF THEIR RESPECTIVE EMPLOYEES, MAY BE SOLICITING PROXIES
FROM THEIR RESPECTIVE STOCKHOLDERS IN FAVOR OF THE APPROVAL OF THE
MERGER. INFORMATION REGARDING THE PERSONS WHO MAY, UNDER SEC RULES, BE
DEEMED TO BE PARTICIPANTS IN THE SOLICITATION OF VALERO AND UDS
STOCKHOLDERS IN CONNECTION WITH THE MERGER IS SET FORTH, IN THE CASE
OF VALERO, IN VALERO'S PROXY STATEMENT FOR ITS 2001 ANNUAL MEETING,
FILED WITH THE SEC ON MARCH 28, 2001, AND IN THE CASE OF UDS, IN UDS'S
PROXY STATEMENT FOR ITS 2001 ANNUAL MEETING, FILED WITH THE SEC ON
MARCH 27, 2001, AND ADDITIONAL INFORMATION WILL BE SET FORTH IN THE
DEFINITIVE PROXY STATEMENT/PROSPECTUS REFERRED TO ABOVE WHEN IT IS
FILED WITH THE SEC.