07/6 - Tosco to sell San Francisco refinery to UDS

Tosco Corp. TOS , a top U.S. independent refining and marketing company, said Wednesday it agreed to sell its Avon oil refinery near San Francisco to Ultramar Diamond Shamrock Corp. UDS for about $800 million.

Tosco said the deal includes $650 million cash and a payment of up to $150 million in so-called participation payments, based on refining margins. Under the deal, Ultramar Diamond Shamrock will also buy crude oil and other inventories associated with the 168,000 barrel per day refinery.

Tosco said it would use $200 million of the proceeds to reduce its debt, while adding that it is now reviewing an earlier plan to issue additional stock during the third quarter. The refining company, which itself has made a string of acquisitions over recent years, also said it will record a modest profit on the sale.

For its part, UDS said that by the end of the first full year of operations, the acquisition is expected to add about 90 cents per year to basic earnings per share and over $125 million in operating cash flow.