UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

SCHEDULE 14A

 

PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES

AND EXCHANGE ACT OF 1934

 

Filed by the Registrant þ

 

Filed by a Party other than the Registrant o

 

Check the Appropriate Box:

 

o  Preliminary Proxy Statement

 

o  Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

 

þ  Definitive Proxy Statement

 

o  Definitive Additional Materials

 

o  Soliciting Materials Pursuant to § 240.14a-11(c) or § 240.14a-12

 

GIANT INDUSTRIES, INC.

(Name of Registrant as Specified In Its Charter)

 

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

 

Payment of Filing Fee (Check the appropriate box):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GIANT INDUSTRIES, INC.
23733 North Scottsdale Road
Scottsdale, Arizona 85255

 

Dear Stockholder:

 

You are cordially invited to attend a special meeting of stockholders of Giant Industries, Inc., which will be held at the Hyatt Regency Greenwich located at 1800 East Putnam Avenue, Old Greenwich, CT 06870, on February 27, 2007, at 9:00 a.m., local time.

 

At the meeting, you will be asked to consider and vote on a proposal to adopt an amended merger agreement that Giant has entered into with Western Refining, Inc. and a wholly-owned subsidiary of Western and approve the merger. If our stockholders adopt the amended merger agreement and approve the merger and the merger is subsequently completed, Giant will become a wholly-owned subsidiary of Western, and you will be entitled to receive $77.00 in cash for each share of Giant common stock that you own. A copy of the merger agreement and a copy of the amendment to the merger agreement are attached as Annex A to the accompanying proxy statement, and you are encouraged to read them in their entirety.

 

After careful consideration, our board of directors has unanimously approved the adoption of the amended merger agreement and unanimously approved the merger and determined that the merger and the amended merger agreement are advisable and in the best interests of Giant and its stockholders. Our board of directors recommends that you vote “FOR” the adoption of the amended merger agreement and the approval of the merger. In reaching its determination, our board of directors considered a number of factors, including the opinion of our financial advisor, which is attached as Annex B to the accompanying proxy statement, and which you are urged to read in its entirety.

 

Our board of directors also unanimously recommends that our stockholders vote “FOR” approval of adjournment or postponement of the special meeting, if necessary, to solicit additional proxies in favor of the proposal to adopt the amended merger agreement and approve the merger or for other proper purposes.

 

The accompanying document provides a detailed description of the proposed merger, the amended merger agreement and related matters. I urge you to read these materials carefully.

 

Your vote is very important. Because adoption of the amended merger agreement requires the affirmative vote of the holders of a majority of the outstanding shares of Giant common stock entitled to vote, a failure to vote will have the same effect as a vote against the adoption of the amended merger agreement.

 

Whether or not you are able to attend the special meeting in person, please complete, sign and date the enclosed proxy card and return it in the envelope provided as soon as possible or submit a proxy through the Internet or by telephone as described in the enclosed proxy card. Your submission of a proxy by any of these means will not limit your right to vote in person if you wish to attend the special meeting and vote in person.

 

Thank you for your cooperation and your continued support of Giant.

 

Sincerely,

 

 

Fred L. Holliger

Chairman of the Board of Directors

 

The attached Proxy Statement is dated January 31, 2007, and is first being mailed to stockholders of Giant on or about February 2, 2007.

 

Neither the United States Securities and Exchange Commission nor any state securities commission has approved or disapproved of the transaction described in the enclosed Proxy Statement, passed upon the merits or fairness of the transaction, or passed upon the adequacy or accuracy of the disclosures in the enclosed Proxy Statement. Any representation to the contrary is a criminal offense.

 

GIANT INDUSTRIES, INC.
23733 North Scottsdale Road
Scottsdale, Arizona 85255

 

 

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON FEBRUARY 27, 2007

 

 

To our Stockholders:

 

Notice is hereby given that a special meeting of stockholders of Giant Industries, Inc. will be held at 9:00 a.m., local time, on February 27, 2007, at the Hyatt Regency Greenwich, 1800 East Putnam Avenue, Old Greenwich, CT 06870 for the following purposes:

 

1. To consider and vote upon a proposal to adopt the Agreement and Plan of Merger dated as of August 26, 2006, by and among Western Refining, Inc., New Acquisition Corporation and Giant Industries, Inc., as amended by Amendment No. 1 to Agreement and Plan of Merger dated as of November 12, 2006, and approve the merger.

 

2. To transact such other business as may properly come before the meeting or any adjournment or postponement thereof, including to consider any procedural matters incident to the conduct of the special meeting, such as adjournment or postponement of the special meeting to solicit additional proxies in favor of the proposal to adopt the Agreement and Plan of Merger and approve the merger or for other proper purposes.

 

Only holders of record of our common stock as of the close of business on January 26, 2007 are entitled to notice of, and to vote at, the special meeting and any adjournment or postponement of the special meeting. The affirmative vote of the holders of a majority of the outstanding shares of our common stock entitled to vote is required to adopt the amended merger agreement and approve the merger.

 

If you fail to vote by proxy or in person, it will have the same effect as a vote against the adoption of the amended merger agreement. If you return a properly signed proxy card but do not indicate how you want to vote, your proxy will be counted as a vote “FOR” adoption of the amended merger agreement and approval of the merger. Holders of our common stock are entitled to appraisal rights under the General Corporation Law of the State of Delaware in connection with the merger. See “Appraisal Rights” on page 36.

 

By Order of the Board of Directors,

 

 

Fred L. Holliger

Chairman of the Board of Directors

 

Scottsdale, Arizona

January 31, 2007

 

 

 

 

TABLE OF CONTENTS

 

 

The following questions and answers are provided for your convenience and briefly address some commonly asked questions about the proposed merger and the Giant special meeting of stockholders. We urge you to carefully read this entire proxy statement, including each of the annexes.

 

Who is soliciting my proxy?

 

This proxy is being solicited by our board of directors.

 

What matters will be voted on at the special meeting?

 

You will be asked to vote on the adoption of the amended merger agreement that we have entered into with Western Refining, Inc. (which is referred to in this proxy statement as Western) and the approval of the merger. In addition, you will be asked to vote on a proposal to adjourn or postpone the special meeting, if necessary, to solicit additional proxies in favor of the proposal to adopt the amended merger agreement and to approve the merger or for other proper purposes.

 

What vote is required for Giant’s stockholders to adopt the amended merger agreement and approve the merger?

 

In order to adopt the amended merger agreement and approve the merger, holders of a majority of the outstanding shares of our common stock entitled to vote must vote “FOR” adoption of the amended merger agreement and approval of the merger.

 

Who is entitled to vote at the special meeting?

 

Holders of record of our common stock as of the close of business on January 26, 2007 are entitled to vote at the special meeting.

 

What should I do now?

 

After carefully reading and considering the information contained in this proxy statement, please vote your shares by returning the enclosed proxy or submitting a proxy through the Internet or by telephone. You can also attend the special meeting and vote in person. Please do NOT enclose or return your stock certificate(s) with your proxy.

 

If my shares are held in “street name” by my broker, will my broker vote my shares for me?

 

Your broker will only be permitted to vote your shares if you instruct your broker how to vote. You should follow the procedures provided by your broker regarding the voting of your shares.

 

What if I do not vote?

 

If you fail to vote by proxy, either by mail, through the Internet or by telephone, or in person, it will have the same effect as a vote “AGAINST” adoption of the amended merger agreement and “AGAINST” approval of the merger. If you return a properly signed proxy card but do not indicate how you want to vote, your proxy will be counted as a vote “FOR” adoption of the amended merger agreement and approval of the merger.

 

When should I send in my proxy card?

 

You should send in your proxy card as soon as possible so that your shares will be voted at the special meeting.

 

May I change my vote after I have mailed my signed proxy card?

 

Yes. You may change your vote at any time before your proxy card is voted at the special meeting. You can do this in one of following ways. First, you can send a written, dated notice to any of the persons named as proxies or the Corporate Secretary of Giant stating that you would like to revoke your proxy. Second, you can complete, date and submit a new proxy card either by mail, through the Internet or by telephone. Third, you can attend the meeting and vote in person. Your attendance alone will not revoke your proxy. If you have instructed a broker to vote your shares, you must follow directions received from your broker to change those instructions.

 

May I vote in person?

 

Yes. You may attend the special meeting of stockholders and vote your shares of common stock in person. If you hold shares in “street name” you must provide a legal proxy executed by your bank or broker in order to vote your shares at the meeting.

 

What is the proposed transaction?

 

Western will acquire us by merger. A newly-formed subsidiary of Western will merge into Giant with Giant as the surviving corporation. We will cease to be a publicly-traded company and will instead become a wholly-owned subsidiary of Western.

 

If the merger is completed, what will I be entitled to receive for my shares of Giant common stock and when will I receive it?

 

You will be entitled to receive $77.00 in cash, without interest and less any applicable withholding taxes, for each share of our common stock that you own.

 

After the merger closes, Western will promptly arrange for a letter of transmittal or other instructions to be sent to each stockholder. In the case of shares that are certificated, the merger consideration will be paid to each stockholder once that stockholder submits the letter of transmittal, properly endorsed stock certificates and any other required documentation. In the case of uncertificated shares, the merger consideration will be paid to each stockholder once the appropriate book entries are made.

 

Am I entitled to appraisal rights?

 

Yes. Under the General Corporation Law of the State of Delaware, holders of Giant common stock who do not vote in favor of adopting the amended merger agreement and approval of the merger will have the right to seek appraisal of the fair value of their shares as determined by the Delaware Court of Chancery if the merger is completed, but only if they submit a written demand for an appraisal prior to the vote on the adoption of the amended merger agreement and approval of the merger and they comply with the Delaware law procedures explained in this proxy statement. For additional information about appraisal rights, see “Appraisal Rights” beginning on page 36.

 

Why is the Giant board recommending the merger?

 

Our board believes that the merger and the amended merger agreement are advisable and in the best interests of Giant and its stockholders and unanimously recommends that you adopt the amended merger agreement. To review our board’s reasons for recommending the merger, see the section entitled “Reasons for the Merger and Recommendation of the Board of Directors” on pages 15 through 17 of this proxy statement.

 

Will the merger be a taxable transaction to me?

 

Yes. The receipt of cash for shares of Giant common stock pursuant to the merger will be a taxable transaction for U.S. federal income tax purposes. In general, you will recognize gain or loss equal to the difference between the amount of cash you receive and the adjusted tax basis of your shares of our common stock. See the section entitled

“Material U.S. Federal Income Tax Consequences” on pages 26 through 27 of this proxy statement for a more detailed explanation of the tax consequences of the merger. You also should consult your tax advisor on how specific tax consequences, including any state tax consequences, of the merger apply to you.

 

When is the merger expected to be completed?

 

We are working toward completing the merger as promptly as possible. We currently expect to complete the merger as promptly as possible after the special meeting and after all the conditions to the merger are satisfied or waived, including stockholder adoption of the amended merger agreement and approval of the merger at the special meeting and the expiration or termination of the waiting period under U.S. antitrust laws and applicable state or foreign antitrust laws. We, along with Western, filed pre-merger notifications with the U.S. antitrust authorities pursuant to the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (which we refer to as the HSR Act) on September 7, 2006. On or about October 10, 2006, the Federal Trade Commission requested additional information from us and Western concerning the merger. We and Western certified substantial compliance with the Federal Trade Commission’s request for additional information during the last week of December, 2006. We and Western have entered into a timing agreement with the Federal Trade Commission pursuant to which we agreed not to close the merger until at least 60 days after certification of substantial compliance and to provide the Federal Trade Commission at least 30 days notice of the planned closing date. The Federal Trade Commission has not yet agreed that we and Western are in substantial compliance, and we cannot assure you that they will agree that substantial compliance occurred in December, 2006. Further, the Federal Trade Commission may take the position there was an omission in Western’s original HSR Act filing and that the initial HSR Act 30-day waiting period has not yet commenced. For additional information, see the section entitled “Regulatory Matters” beginning on page 25.

 

Should I send in my Giant stock certificates now?

 

No. After the merger is completed, Western will arrange to have written instructions for exchanging your Giant stock certificates sent to you. If your shares are certificated, you must return your Giant stock certificates as described in the instructions. If your shares are certificated, you will receive your cash payment as soon as practicable after Western receives your Giant stock certificates and any completed documents required in the instructions. If your shares are held in book-entry or other uncertificated form, you will receive your cash payment as soon as practicable after the appropriate book entries are made.

 

PLEASE DO NOT SEND YOUR GIANT STOCK CERTIFICATES NOW.

 

What should I do if I have questions?

 

If you have more questions about the special meeting, the merger or this proxy statement, or would like additional copies of this proxy statement or the proxy card, you should contact Georgeson Shareholder, our proxy solicitor, toll-free at (866) 425-8556.

 

This summary highlights selected information from this proxy statement. It does not contain all of the information that is important to you. Accordingly, we urge you to read this entire proxy statement and the annexes to this proxy statement.

 

Giant Industries, Inc.
23733 North Scottsdale Road
Scottsdale, Arizona 85255
(480) 585-8888

 

Giant Industries, Inc. is a Delaware corporation headquartered in Scottsdale, Arizona. Giant, through its subsidiaries, is a refiner and marketer of petroleum products. Giant owns and operates one Virginia and two New Mexico crude oil refineries. In addition, Giant owns a crude oil gathering pipeline system based in Farmington, New Mexico, which services the New Mexico refineries. Giant also owns finished products distribution terminals in Albuquerque, New Mexico and Flagstaff, Arizona, a fleet of crude oil and finished product truck transports, and a chain of retail service station/convenience stores in New Mexico, Colorado, and Arizona. Giant is also the parent company of Phoenix Fuel Co., Inc., Dial Oil Co. and Empire Oil Co., all of which are wholesale petroleum products distributors. Our common stock is listed on The New York Stock Exchange under the symbol “GI.”

 

Western Refining, Inc.
6500 Trowbridge Road
El Paso, Texas 79905
(915) 775-3300

 

Western Refining, Inc. is a Delaware corporation headquartered in El Paso, Texas. Western is an independent crude oil refiner and marketer of refined products, and operates primarily in the Southwestern region of the United States, including Arizona, New Mexico, and West Texas. Western’s common stock is listed on The New York Stock Exchange under the symbol “WNR.”

 

New Acquisition Corporation
6500 Trowbridge Road
El Paso, Texas 79905
(915) 775-3300

 

New Acquisition Corporation is a newly-incorporated Delaware corporation (which we refer to as Merger Sub) and a direct, wholly-owned subsidiary of Western. New Acquisition Corporation was formed by Western exclusively for the purpose of effecting the merger. This is the only business of New Acquisition Corporation.

 

Date, Time and Place (page 7)

 

The special meeting will be held on February 27, 2007, at 9:00 a.m., local time at the Hyatt Regency Greenwich, located at 1800 East Putnam Avenue, Old Greenwich, CT 06870.

 

Matters to be Considered (page 7)

 

You will be asked to consider and vote upon a proposal to adopt the amended merger agreement that we have entered into with Western and to approve the merger and to consider any other matters that may properly come before the meeting, including any procedural matters in connection with the special meeting.

 

Record Date (page 7)

 

If you owned shares of our common stock at the close of business on January 26, 2007, the record date for the special meeting, you are entitled to notice of and to vote at the special meeting. You have one vote for each share of

our common stock that you own on the record date. As of the close of business on January 26, 2007, there were approximately 14,639,312 shares of our common stock outstanding and entitled to be voted at the special meeting.

 

Required Vote (page 7)

 

Adoption of the amended merger agreement and approval of the merger require the affirmative vote of the holders of a majority of our outstanding shares of common stock entitled to vote at the special meeting. Failure to vote by proxy, either by mail, through the Internet or by telephone, or to vote in person, will have the same effect as a vote “AGAINST” adoption of the amended merger agreement and approval of the merger.

 

Adoption of the proposal to adjourn or postpone the special meeting, if necessary, to consider any procedural matters related to the special meeting, including to solicit additional proxies in favor of the proposal to adopt the amended merger agreement and approve the merger and for other proper purposes, requires the affirmative vote of a majority of the shares of our common stock represented in person or by proxy at the special meeting.

 

Voting by Proxy (page 8)

 

You may vote by proxy through the Internet, by telephone or by returning the enclosed proxy. If you hold your shares through a broker or other nominee, you should follow the procedures provided by your broker or nominee, which may include submitting a proxy through the Internet or by telephone.

 

Revocability of Proxy (page 8)

 

You may revoke your proxy at any time before it is voted. If you have not submitted a proxy through your broker or nominee, you may revoke your proxy by:

 

 

Simply attending the special meeting will not constitute revocation of your proxy. If your shares are held in street name, you should follow the instructions of your broker or nominee regarding revocation of proxies. If your broker or nominee allows you to submit a proxy by telephone or through the Internet, you may be able to change your vote by submitting a proxy again by telephone or through the Internet.

 

Our Board’s Recommendation to Our Stockholders Regarding the Merger (page 15)

 

Our board has approved the amended merger agreement, and determined that the merger and the amended merger agreement are advisable, and in the best interests of, Giant and its stockholders. Our board unanimously recommends that our stockholders vote “FOR” adoption of the amended merger agreement and approval of the merger at the special meeting.

 

Structure of the Merger (page 27)

 

Upon the terms and subject to the conditions of the amended merger agreement, Merger Sub, a wholly-owned subsidiary of Western, will be merged with and into Giant. As a result of the merger, we will cease to be a publicly-traded company and will become a wholly-owned subsidiary of Western. The amended merger agreement is attached as Annex A to this proxy statement. We urge you to read it carefully.

 

What You Will Receive in the Merger (page 27)

 

Each stockholder will be entitled to receive $77.00 in cash, without interest and less any applicable withholding taxes, for each share of our common stock held immediately prior to the merger.

 

Opinion of Financial Advisor to the Board of Directors of Giant (page 18)

 

Pursuant to a letter agreement dated as of July 24, 2006, Deutsche Bank was engaged to act as our financial advisor. Our board of directors selected Deutsche Bank based on Deutsche Bank’s reputation and experience in the petroleum industry. At our board meeting on November 12, 2006, Deutsche Bank rendered its opinion that as of such date, and based upon and subject to the various qualifications, factors, assumptions and limitations described in the Deutsche Bank opinion, the $77.00 in cash per share to be received by holders of our common stock pursuant to the amended merger agreement was fair, from a financial point of view, to such holders.

 

The full text of Deutsche Bank’s opinion, which describes the various qualifications, factors, assumptions and limitations on the review undertaken by Deutsche Bank, is attached as Annex B to this proxy statement. Holders of our common stock are urged to, and should, read the Deutsche Bank opinion carefully and in its entirety. The Deutsche Bank opinion was addressed solely to our board of directors, was limited to the fairness, from a financial point of view, of the merger consideration to holders of our common stock as of the date of the opinion, and Deutsche Bank expressed no opinion as to the merits of the underlying decision by Giant to engage in the merger or as to how any holder of shares of Giant stock should vote with respect to the merger. The summary of the Deutsche Bank opinion set forth in this proxy statement is qualified in its entirety by reference to the full text of such opinion. Our board of directors does not currently intend to seek an updated fairness opinion in connection with the merger.

 

Deutsche Bank had also rendered a fairness opinion to our board of directors on August 25, 2006, in connection with the original merger agreement. A copy of that opinion is available to any stockholder upon request.

 

Deposit (page 28)

 

Concurrently with the execution of the original merger agreement, Western deposited $12.5 million into an escrow account. This amount was increased by Western to $25 million on November 30, 2006 because the waiting period applicable to the consummation of the merger had not expired or been terminated by such date under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (which we refer to in this proxy statement as the HSR Act). The deposit is payable to us as liquidated damages if we terminate the amended merger agreement due to Western’s breach or if the merger has not been consummated by April 30, 2007 because the waiting period applicable to the consummation of the merger has not expired or been terminated under the HSR Act or any waiting period or any required consent under any applicable state or foreign competition or antitrust law has not expired or been obtained. At the effective time of the merger, the deposit will be paid to the paying agent for distribution to our stockholders as part of the merger consideration.

 

Conditions to the Merger (page 34)

 

We and Western will not complete the merger unless a number of conditions are satisfied or waived. These conditions include:

 

 

 

 

 

 

 

 

Termination of the Amended Merger Agreement (page 35)

 

The amended merger agreement may be terminated and the merger may be abandoned at any time prior to the effective time of the merger (notwithstanding any approval by our stockholders):

 

 

 

 

 

 

 

 

 

 

Termination Fee (page 36)

 

The amended merger agreement obligates us to pay a termination fee to Western of $34 million, plus reimburse up to $1 million of Western’s expenses relating to the merger, if:

 

 

 

In the event that we terminate the amended merger agreement due to a Western breach, or if the merger has not been consummated by April 30, 2007 because the waiting period applicable to the consummation of the merger has not expired or been terminated under the HSR Act or any waiting period or any required consent under any applicable state or foreign competition or antitrust law has not expired or been obtained, then we are entitled to retain the $25 million deposit as liquidated damages as our sole remedy. See “The Merger Agreement — Deposit.”

 

Regulatory Matters (page 25)

 

Under the provisions of the HSR Act, we and Western may not complete the merger until we have made certain filings with the Federal Trade Commission and the United States Department of Justice and the applicable waiting period has expired or been terminated. We and Western filed pre-merger notifications with the U.S. antitrust authorities pursuant to the HSR Act on September 7, 2006. On or about October 10, 2006, the Federal Trade Commission requested additional information from us and Western concerning the merger. We and Western certified substantial compliance with the request for additional information during the last week of December, 2006. We and Western have entered into a timing agreement with the Federal Trade Commission pursuant to which we agreed not to close the merger until at least 60 days after certification of substantial compliance and to provide the Federal Trade Commission at least 30 days notice of the planned closing date. The Federal Trade Commission has not yet agreed that we and Western are in substantial compliance, and we cannot assure you that they will agree that substantial compliance occurred in December, 2006. Further, the Federal Trade Commission may take the position there was an omission in Western’s original HSR Act filing and that the initial HSR Act 30-day waiting period has not yet commenced. In addition, the merger may be subject to state or foreign competition or antitrust laws. We cannot assure you that a challenge to the merger on antitrust grounds will not be made or, if a challenge is made, of the result.

 

Appraisal Rights (page 36)

 

Under Delaware law, if you do not vote for adoption of the amended merger agreement and prior to the special meeting you make a written demand and you strictly comply with the other statutory requirements of the General Corporation Law of the State of Delaware, you may elect to receive, in cash, the judicially determined fair value of your shares of stock in lieu of the $77.00 per share merger consideration. This value could be more or less than or the same as the cash merger consideration.

 

Giant Stock Options (page 28)

 

Giant stock options that are outstanding as of the effective time of the merger will be cancelled. At the effective time of the merger, the holders of those options will become entitled to receive a cash payment equal to the number of shares subject to their stock options multiplied by the difference between $77.00 and the per share option exercise price, less applicable withholding taxes.

 

Interests of Certain Persons in the Merger (page 23)

 

As you consider the recommendation of our board of directors, you should be aware that some of our executive officers and directors have relationships with Giant and/or Western that are different from, or in addition to, those of other stockholders and that may present actual or potential conflicts of interest. These interests are discussed in detail in the section entitled “The Merger — Interests of Certain Persons in the Merger.”

 

No Solicitation (page 32)

 

In connection with the original merger agreement, we agreed that neither we nor any of our officers, directors, employees, agents or representatives, including our investment bankers, attorneys and accountants, would solicit, initiate or encourage any acquisition proposals by a third party. The amended merger agreement, however, permitted us a “go-shop” period that began on November 13, 2006 and continued until December 13, 2006, during which we were permitted to initiate, solicit and encourage acquisition proposals by third parties. The activities that occurred during the go-shop period are described in “The Merger — Background of the Merger.” Despite our marketing efforts during the go-shop period, we did not receive any acquisition proposals. Accordingly, until such time as our stockholders adopt the amended merger agreement and approve the merger, we are again subject to the restrictions on solicitation, although we may provide information to and participate in discussions or negotiations with a third party if we receive an unsolicited bona fide acquisition proposal and if:

 

 

 

 

We have agreed to promptly notify Western of our receipt of any acquisition proposal, request for information or inquiry with respect to any acquisition proposal, the material terms of any such acquisition proposal or inquiry, and the identity of the person making any such acquisition proposal or inquiry. We are also required to keep Western informed of any material changes, additions or adjustments to the terms of any such acquisition proposal or inquiry. We must also give Western notice if our board determines to participate in any such discussions or negotiations or provide any information to the third party.

 

This proxy statement contains forward-looking statements about our plans, objectives, expectations and intentions. You can identify these statements by words such as “expect,” “anticipate,” “intend,” “plan,” “believe,” “seek,” “estimate,” “may,” “will” and “continue” or similar words. You should read statements that contain these words carefully. They discuss our future expectations or state other forward-looking information, and may involve known and unknown risks over which we have no control, including, without limitation,

 

 

 

and other risks detailed in our current filings with the Securities and Exchange Commission (which we refer to as the SEC), including our most recent filings on Forms 10-Q, 10-K and 8-K. See “Where You Can Find More Information” on page 44. You should not place undue reliance on forward-looking statements. We cannot guarantee any future results, levels of activity, performance or achievements. The statements made in this proxy statement represent our views as of the date of this proxy statement, and it should not be assumed that the statements made

herein remain accurate as of any future date. Moreover, we assume no obligation to update forward-looking statements or update the reasons actual results could differ materially from those anticipated in forward-looking statements, except as required by federal securities laws.

 

We are furnishing this proxy statement to you, as a stockholder of Giant, as part of the solicitation of proxies by our board for use at the special meeting of stockholders.

 

The special meeting will be held at the Hyatt Regency Greenwich, located at 1800 East Putnam Avenue, Old Greenwich, CT 06870, on February 27, 2007, at 9:00 a.m., local time. The purpose of the special meeting is:

 

 

 

By unanimous vote, our board has determined that the amended merger agreement and the merger are advisable and in the best interests of Giant and its stockholders, and has approved the amended merger agreement and the merger. Our board unanimously recommends that our stockholders vote “FOR” adoption of the amended merger agreement and approval of the merger. By unanimous vote, our board also recommends that our stockholders vote “FOR” approval of the proposal to adjourn or postpone the special meeting, if necessary, to solicit additional proxies in favor of the proposal to adopt the amended merger agreement and approve the merger or for other proper purposes.

 

The holders of record of shares of our common stock as of the close of business on January 26, 2007, which is the record date for the special meeting, are entitled to receive notice of and to vote at the special meeting.

 

On the record date, there were approximately 14,639,312 shares of our common stock outstanding held by approximately 212 stockholders of record. Holders of a majority of the shares of our common stock issued and outstanding as of the record date and entitled to vote at the special meeting must be present in person or represented by proxy at the special meeting to constitute a quorum to transact business at the special meeting. Shares of our common stock represented at the special meeting but not voting, including shares of our common stock for which proxies have been received but for which stockholders have abstained, as well as shares held by brokers or other nominees in “street name” for customers who are beneficial owners that are not voted at the meeting, will be counted as present for purposes of determining the existence of a quorum. In the event that a quorum is not present at the special meeting, we currently expect that we will adjourn or postpone the meeting to solicit additional proxies.

 

Adoption of the amended merger agreement and approval of the merger requires the affirmative vote of the holders of a majority of the shares of our common stock outstanding on the record date and entitled to vote.

 

Each holder of a share of our common stock is entitled to one vote per share. Failure to vote your proxy (either through the Internet, by telephone or by returning a properly executed proxy card) or to vote in person will have the same effect as a vote “AGAINST” adoption of the amended merger agreement and approval of the merger.

 

Brokers or other nominees who hold shares of our common stock in “street name” for customers who are the beneficial owners of such shares may not give a proxy to vote those customers’ shares in the absence of specific instructions from those customers. These non-voted shares of our common stock will not be counted as votes cast or shares voting and will have the same effect as votes “AGAINST” adoption of the amended merger agreement and approval of the merger.

 

The proposal to approve adjournment or postponement of the special meeting if deemed necessary to facilitate the adoption of the amended merger agreement and the approval of the merger, including to permit the solicitation of additional proxies if there are not sufficient votes at the time of the special meeting to adopt the amended merger agreement and approve the merger or for other proper purposes, requires the affirmative vote of a majority of the shares of our common stock represented in person or by proxy at the special meeting, even if less than a quorum.

 

Stockholders may vote their shares of our common stock by attending the special meeting and voting their shares in person, or by completing the enclosed proxy card, signing and dating it and mailing it in the enclosed postage-prepaid envelope. All shares of our common stock represented by properly executed proxies received in time for the special meeting will be voted at the special meeting in the manner specified by the holder. If a written proxy card is signed by a stockholder and returned without instructions, the shares of our common stock represented by the proxy will be voted “FOR” adoption of the amended merger agreement and approval of the merger and “FOR” approval of adjournment or postponement of the special meeting if deemed necessary to facilitate the adoption of the amended merger agreement and approval of the merger, including to permit the solicitation of additional proxies if there are not sufficient votes at the time of the special meeting to approve the merger proposal.

 

In addition, stockholders may submit a proxy through the Internet or by telephone by following the instructions included with the enclosed proxy card. If you submit a proxy through the Internet or by telephone, please do not return the proxy card. You should be aware that in submitting a proxy through the Internet, you may incur costs such as telephone and Internet access charges for which you will be responsible. The Internet voting facility and the telephone voting facility for stockholders of record will close at 9:00 a.m., Eastern Standard Time, on February 27, 2007.

 

Stockholders who have questions or requests for assistance in completing and submitting proxy cards should contact Georgeson Shareholder, our proxy solicitor, at (866) 425-8556.

 

Stockholders who hold their shares of Giant common stock in “street name,” meaning in the name of a bank, broker or other person who is the record holder, must either direct the record holder of their shares of our common stock how to vote their shares or obtain a proxy from the record holder to vote their shares at the special meeting.

 

You can revoke your proxy at any time before it is voted at the special meeting by:

 

 

If your shares of our common stock are held in the name of a bank, broker, trustee or other holder of record, you must follow the instructions of your broker or other holder of record to revoke a previously given proxy. If your broker or nominee allows you to submit a proxy by telephone or through the Internet, you may be able to change your vote by submitting a proxy again by telephone or through the Internet.

 

In addition to solicitation by mail, our directors, officers and employees may solicit proxies by telephone, other electronic means or in person. These people will not receive any additional compensation for their services, but we will reimburse them for their out-of-pocket expenses. We will reimburse banks, brokers, nominees, custodians and fiduciaries for their reasonable expenses in forwarding copies of this proxy statement to the beneficial owners of shares of our common stock and in obtaining voting instructions from those owners. We will bear all expenses of filing, printing and mailing this proxy statement.

 

We have retained Georgeson Shareholder to assist with the solicitation of proxies for a fee not to exceed $10,000, plus reimbursement for out-of-pocket expenses relating to the solicitation.

 

We are not currently aware of any business to be acted upon at the special meeting other than the matters discussed in this proxy statement. Under our bylaws, business transacted at the special meeting is limited to matters relating to the purposes stated in the notice of special meeting, which is provided at the beginning of this proxy statement. If other matters do properly come before the special meeting, or at any adjournment or postponement of the special meeting, we intend that shares of our common stock represented by properly submitted proxies will be voted by and at the discretion of the persons named as proxies on the proxy card. In addition, the grant of a proxy will confer discretionary authority on the persons named as proxies on the proxy card to vote in accordance with their best judgment on procedural matters incident to the conduct of the special meeting, such as a motion to adjourn in the absence of a quorum or a motion to adjourn for other reasons, if necessary, including to solicit additional votes in favor of adoption of the amended merger agreement and approval of the merger or other proper purposes.

 

This discussion of the merger is qualified by reference to the merger agreement and the amendment thereto, which are attached to this proxy statement as Annex A. We urge you to read the entire amended merger agreement carefully, as it is the legal document that governs the merger.

 

Our senior management and board of directors periodically review strategic matters relating to our growth.

 

On or about May 27, 2004, our chief executive officer, Mr. Holliger, met with the chief executive officer of Western, Mr. Foster, at which time Mr. Foster asked whether Giant would be interested in a possible business combination with Western. Mr. Holliger advised Mr. Foster that Giant would not likely be interested in a business combination at that time because Giant’s stock price was trading below anticipated future levels due to expected improvement in financial condition.

 

Between 2004 and 2006, our board of directors periodically discussed strategic alternatives available to Giant and its individual business units. In furtherance of these discussions, at a meeting of the board held on April 10-11, 2006, our senior management discussed with our board options potentially available to Giant. In connection with this discussion, the board was provided a five-year financial projection and information on the refining industry prepared by third-party sources.

 

On April 13, 2006, Mr. Foster contacted Mr. Holliger and inquired as to whether Mr. Holliger would be willing to meet to discuss a possible business combination between Western and Giant. Mr. Holliger indicated that he would be willing to meet with Mr. Foster.

 

On May 25, 2006, Mr. Foster met with Mr. Holliger in Giant’s offices. Mr. Foster expressed interest in a possible purchase of Giant in a cash transaction at a premium over the current trading price of Giant’s stock. Mr. Holliger met separately with the chairman and the chief executive officer of a second independent refining company (which is referred to in this proxy statement as Company X) on May 25, 2006, and they indicated that Company X would be interested in a business combination involving cash and stock at a premium over the current trading price of Giant’s stock.

 

Our senior management again discussed strategic alternatives potentially available to Giant with the board at a meeting held on June 6, 2006. Prior to the meeting, senior management had prepared and circulated to the board a financial analysis of Giant, including an analysis of the stock performance of Giant compared to other refining companies during 2006, a five-year financial projection and various potential valuations of Giant based on different valuation methodologies. During the meeting, the board discussed refineries that were available for purchase and other assets being offered for sale in which Giant might have an interest. Mr. Holliger advised the board that he had talked to the chief executive officer of a third independent refining company about the possibility of combining the two respective businesses under a variety of structures, but the chief executive officer of the other company indicated that they were not interested in pursuing any of the structures discussed. Mr. Holliger also advised the board that he had been separately approached by the chairman and chief executive officer of Company X and the chief executive officer of Western about a business combination. The board discussed the possibility of pursuing a transaction with each of these companies, and ultimately directed Mr. Holliger to obtain information from both companies regarding their interest in a transaction so that the board could determine whether it might be willing to consider a proposed transaction. The board was particularly interested in the valuations that Company X and Western would ascribe to Giant.

 

On June 7, 2006, Mr. Holliger spoke with Mr. Foster regarding Western’s interest in acquiring Giant. Mr. Foster indicated that Western’s board might be interested in making an offer for Giant at $75 per share, which represented a premium above the then-current trading price of Giant’s common stock. Mr. Holliger advised Mr. Foster that he believed that the $75 per share price would likely be viewed by Giant’s board as too low.

 

On June 8, 2006, Mr. Holliger contacted the chairman of Company X in order to clarify the proposed structure of Company X’s offer to acquire Giant for stock and cash.

 

On June 13, 2006, Mr. Holliger and the chairman of Company X further discussed the pricing of a proposed business combination of the two companies.

 

On June 13, 2006, Mr. Holliger spoke with Mr. Foster regarding Western’s interest in acquiring Giant. Mr. Foster advised Mr. Holliger that Western remained interested at a price of $75 per share, and Mr. Foster stated that Western might pay as much as $77 per share if Western could get comfortable with Giant’s new crude oil pipeline during due diligence. Mr. Holliger advised Mr. Foster that he would discuss the price with Giant’s board members.

 

Between June 13 and June 20, 2006, Mr. Holliger contacted members of Giant’s board to discuss the progress of the discussions with Western and Company X. On June 20, 2006, Mr. Holliger informed Mr. Foster that unless Western’s offer exceeded $80 per share, Giant’s board would not likely be interested in continuing discussions regarding a possible transaction. On June 20, 2006, Mr. Holliger also informed the chairman of Company X that he had discussed Company X’s interest in Giant with various board members. Mr. Holliger informed Company X’s chairman that Giant was willing to provide Company X with the additional information that it needed to make an offer but that Giant’s board likely would only be interested if Company’s X’s offer exceeded $80 per share. Company X’s chairman indicated to Mr. Holliger that he would need additional information regarding Giant’s proposed capital expenditures.

 

On June 21, 2006, Mr. Holliger sent to Company X’s chief executive officer a letter regarding the timing of Giant’s anticipated capital expenditures.

 

On June 22, 2006, Mr. Holliger spoke with Mr. Foster regarding Western’s interest in acquiring Giant. Mr. Foster told Mr. Holliger that Western might be interested in purchasing Giant at approximately $80 per share, but Western must understand the potential benefits from Giant’s new crude oil pipeline.

 

On June 22, 2006, Mr. Holliger spoke with Company X’s chairman and chief executive officer to discuss pricing for a proposed business combination between the two companies. Mr. Holliger indicated the he would discuss Company X’s interest further with Giant’s board.

 

In late June 2006, Mark Cox, our chief financial officer, contacted Deutsche Bank Securities Inc. about representing Giant.

 

On June 26, 2006, Mr. Foster advised Mr. Holliger that Western would be interested in acquiring Giant at $80 per share in a transaction with no contingencies, other than customary environmental, regulatory and corporate conditions to closing.

 

On June 29, 2006, the chairman of Company X advised Mr. Holliger that he would meet with Company X’s investment bankers, and on June 30, 2006, Company X delivered a preliminary due diligence request to senior management of Giant.

 

On July 3, 2006, after speaking informally with several Giant board members, Mr. Holliger informed Mr. Foster that Giant’s board was willing to engage an investment bank and provide the due diligence information necessary for Western to make an offer to Giant. Mr. Holliger advised Mr. Foster that if Western remained interested after conducting its due diligence, then it would need to submit a formal proposal to Giant’s board.

 

On July 3, 2006, Company X and Giant entered into a confidentiality agreement, which covered both past and future disclosures of information related to a possible transaction.

 

Between July 3 and July 6, 2006, Mr. Foster spoke with Western’s financial advisors regarding the amount of due diligence that would be required in order to submit a written offer to Giant’s board. On July 6, 2006, Western submitted a preliminary due diligence list to Mr. Holliger and Giant’s senior management.

 

Prior to July 6, 2006, Western advised Giant that Western would be engaging Bank of America Securities as financial advisor in connection with the due diligence and a possible transaction. Company X advised Giant that Company X would be engaging a separate financial advisor for the same purpose.

 

On July 6, 2006, representatives of Company X and their financial advisors met with our senior management and representatives of Deutsche Bank in a due diligence session at the office of our outside counsel. Following this meeting, the chief executive officer of Company X reaffirmed to Mr. Holliger Company X’s interest in continuing discussions about a possible cash and stock transaction.

 

On July 7, 2006, our chief financial officer sent a capital expenditure schedule to Company X and Western.

 

On July 10, 2006, Western and Giant entered into a confidentiality agreement, which covered both past and future disclosures of information related to a possible transaction.

 

Company X asked for our permission to permit its financial advisor to engage an engineering consulting firm which had worked with us for the purpose of utilizing a Giant computer model to analyze alternative crude oil inputs and refined products outputs for our Yorktown refinery, and on July 12, 2006 we entered into a confidentiality agreement with the financial advisor for Company X.

 

On July 11, 2006, representatives of Western, its outside counsel and Bank of America Securities met with our chief financial officer and general counsel and representatives of Deutsche Bank in a due diligence session on legal and environmental matters at the office of our outside counsel. On July 18, 2006, Western and its counsel and financial advisors returned for a due diligence session with our senior management related to our business and operational matters. At this meeting, our chief financial officer provided and discussed with Western a financial model, including a capital expenditure schedule and certain financial forecasting information. Following both of these meetings, Mr. Foster reaffirmed to Mr. Holliger Western’s interest in purchasing Giant for cash.

 

On July 14, 2006, Western’s outside counsel provided to our general counsel and our outside counsel a draft cash merger agreement.

 

On July 19, 2006, our chief financial officer provided the same financial model previously provided to Western to Deutsche Bank, and representatives of Deutsche Bank forwarded the financial model to Company X’s financial advisor. Thereafter, on July 21, 2006, our chief financial officer and representatives of Deutsche Bank had a conference call with representatives of Company X and its financial advisor to discuss the financial model.

 

On July 19, 2006, Giant authorized the same engineering consulting firm discussed above to provide Western with information regarding potential opportunities to expand our Yorktown refinery operations.

 

On July 20, 2006, Mr. Holliger sent a letter to Company X’s chief executive officer regarding strategic due diligence issues that our senior management and board would need to discuss regarding Company X in order to evaluate any Company X offer that included Company X stock as part of the consideration.

 

On July 21, 2006, our chief financial officer and general counsel had a conference call with senior management of Company X on due diligence matters.

 

On July 24, 2006, Deutsche Bank and our senior management entered into an agreement regarding Deutsche Bank’s engagement as our financial adviser.

 

On July 26, 2006, Deutsche Bank, on our behalf, sent letters to the chief executive officers of Western and Company X asking them, if they were interested in doing so, to provide us with a non-binding letter of interest for a business combination with Giant, including price, terms, sources of financing and other material terms. Deutsche Bank asked for a response by July 31, 2006.

 

On July 28, 2006, our senior management and representatives of Deutsche Bank traveled to the executive offices of Company X to meet with senior management of Company X and its financial advisor in a due diligence session of Company X.

 

On July 31, 2006, Western submitted a non-binding proposal for the acquisition of 100% of our shares in a merger transaction at a cash price per share of $80.00. Western’s proposal was subject to confirmatory due diligence, the negotiation and execution of a definitive merger agreement, and final approval of its board of directors. The proposal estimated a two-week period to satisfy these conditions, and was accompanied by a firm commitment letter from Bank of America, N.A. and Banc of America Securities LLC for the full amount of financing necessary to consummate the transaction. Mr. Holliger circulated the proposal to the board members.

 

On August 2, 2006, Company X submitted a non-binding proposal for the acquisition of 100% of our shares in a merger transaction at a price per share equal to $85.00, payable $51.00 in cash and $34.00 in shares of Company X common stock valued at the average closing price during the 20 trading days prior to the execution of the merger agreement. Company X’s acquisition proposal was subject to confirmatory due diligence, which it estimated would take three to four weeks. During the due diligence period, Company X indicated that the merger agreement and the financing plan for the transaction would be completed. Mr. Holliger circulated the proposal to the board members.

 

Prior to August 4, 2006, Deutsche Bank sent to the board a package of discussion materials prepared by them, including an industry overview, a summary of the indications of interest received from Western and Company X, information regarding our valuation, information regarding a possible transaction with Western and information regarding a possible transaction with Company X.

 

On August 4, 2006, our board met in a special meeting to consider, among other matters, the proposals submitted by Western and Company X. The board ratified the Deutsche Bank engagement agreement, and representatives of Deutsche Bank joined the meeting. The representatives of Deutsche Bank reviewed the discussion materials with the board and addressed numerous questions from the board. The board discussed the proposals, including whether any proposal should be entertained. Mr. Holliger advised the board that Western would like him to sign a consulting agreement as part of any transaction, and described the proposed terms thereof. The board authorized Mr. Holliger to approach Western with a price of $85.00 per share.

 

Between August 7 and August 10, 2006, Mr. Holliger and Mr. Foster discussed the terms of the Western acquisition proposal, including pricing. On August 7, 2006, Giant announced its earnings results for the second quarter of 2006. On August 8, 2006, Mr. Foster advised Mr. Holliger that Western would pay $81.00 per share, and Western announced its earnings results for the second quarter of 2006.

 

On August 9, 2006, the chief executive officer of Company X discussed with Mr. Holliger possible ideas to secure regulatory approval of a combination of Giant with Company X.

 

On August 10, 2006, Mr. Foster advised Mr. Holliger that Western would pay $83.00 per share. Mr. Holliger advised Mr. Foster that he would discuss the offer with Giant’s board.

 

Between August 11 and August 14, 2006, Mr. Holliger discussed the status of price negotiations and the terms of the Western acquisition proposal with members of our board of directors.

 

Between August 14, 2006 and August 22, 2006, certain of our officers and certain officers from Western, along with counsel, began negotiating the terms of the merger agreement, and Western continued its due diligence. Mr. Holliger engaged separate counsel, and during this time period negotiated with Mr. Foster and Western’s counsel the terms of his consulting agreement.

 

On August 15, 2006, Mr. Holliger and Company X’s chief executive officer discussed the valuation of Company X stock as well as Company X’s plans for Giant’s Yorktown refinery.

 

On August 21, 2006, Mr. Holliger received additional materials regarding the trading value of Company X’s stock from Company X’s chief executive officer.

 

On August 22, 2006, our board of directors began a regularly scheduled two-day meeting. On the first day, in addition to regular agenda matters, Messrs. Holliger, Gust, Cox and Bullerdick advised the board about the status of negotiations concerning the merger with Western. The next day, the board reconvened to further discuss Western’s acquisition proposal. Representatives from Deutsche Bank attended the meeting in person, and our outside counsel on the transaction and our outside antitrust counsel participated in the meeting by telephone. Our antitrust counsel summarized the process of obtaining required antitrust approvals and discussed the likelihood of completing a merger transaction with Western or Company X from an antitrust perspective. Our corporate counsel summarized various terms of the merger agreement with Western for the board, and both counsel answered questions from members of the board regarding the merger. At the conclusion of the meeting, the board authorized Mr. Holliger to continue negotiating the merger agreement with Western and agreed to reconvene when the negotiations had concluded.

 

From August 22 through August 25, 2006, we and our counsel continued to work with Western and its counsel on the merger agreement, and Mr. Holliger and his counsel worked with Western and its counsel on the consulting agreement.

 

On August 23, 2006, our auditor, Deloitte & Touche LLP, and our corporate controller met with Western’s auditor, Ernst & Young LLP, regarding additional due diligence matters.

 

On August 25, 2006, the board of directors convened a special meeting by telephone to discuss the terms of the proposed merger agreement from Western. Also in attendance were representatives of Deutsche Bank, members of our senior management and our outside counsel. In advance of the meeting, a presentation by Deutsche Bank had been circulated to the board, including a fairness opinion. The representatives of Deutsche Bank gave their fairness opinion presentation to the board and answered the board’s questions. Deutsche Bank opined to our board that the merger consideration of $83.00 in cash per share of our common stock to be received by our stockholders pursuant to the merger agreement was fair, from a financial point of view as of such date and based upon and subject to the various qualifications, limitations, factors and assumptions set forth in its written opinion. The board discussed with counsel the final terms of the merger agreement. Our board then unanimously approved the merger and the merger agreement and agreed to recommend the adoption of the merger agreement and approval of the merger to our stockholders.

 

On August 26, 2006, the merger agreement was executed by Western and us and the consulting and non-competition agreement was executed by Western and Mr. Holliger. On August 26, 2006, Mr. Holliger contacted the chief executive officer of Company X and advised him that Giant was moving forward with another merger proposal. Mr. Holliger communicated that the critical issues that resulted in Giant’s board’s decision to proceed with Western’s proposal were the certainty of the all-cash nature of Western’s offer as compared to Company X’s cash and stock offer, and concerns regarding regulatory approvals for a merger with Company X.

 

The proposed transaction between Western and Giant was publicly announced in a joint Giant/Western press release on August 28, 2006.

 

On September 7, 2006, we and Western filed pre-merger notifications with the U.S. antitrust authorities pursuant to the HSR Act and requested “early termination” of the waiting period.

 

On September 30, 2006, there was a fire at our Yorktown refinery that impacted our processing unit used to produce ultra low sulfur diesel fuel. This followed a fire at Yorktown on November 25, 2005, with respect to which repairs were completed in April 2006 and Giant received $89 million in property damage and business interruption

insurance proceeds. On October 5, 2006, a pump failure in the alkylation unit at our Ciniza refinery resulted in a fire at the refinery. The fire caused damage to the alkylation unit and an associated unit. During this same time period, we were undergoing our regular insurance renewal processes. As a result of the fires, our insurance program changed substantially upon renewal, with higher annual insurance premiums, increased deductibles and a longer waiting period for business interruption insurance coverage. We were also at risk that insurance coverage for our refineries would be extremely difficult to obtain, if at all, in the event of another serious accident at one of our refineries. This could have triggered a default under various of our debt instruments.

 

On October 5, 2006, Mr. Foster met with Mr. Holliger to express Western’s concerns about the September 30, 2006 Yorktown fire, increases in our anticipated capital expenditures (including a substantial increase in the cost of completing the low sulfur gasoline project at our Yorktown refinery), and other matters respecting Giant’s operations. A second meeting was held on October 24, 2006, at which Mr. Foster indicated that Western believed that the merger could not move forward at the agreed-upon consideration of $83.00 per share. Mr. Foster and Mr. Holliger further discussed Mr. Foster’s concerns, including concerns regarding changes in our insurance program, in telephone conversations on October 27 and 31, 2006. Western and Giant each engaged special litigation counsel, and on November 1, 2006, Western’s general counsel and outside corporate and litigation counsel met with Giant’s general counsel and outside corporate and litigation counsel. At this meeting, Western stated that it would provide Giant with a formal notice of default on November 6, 2006 unless Giant would agree to mutually terminate the merger agreement or reduce the merger consideration. Western asserted that the fires, the changes in our insurance program, the increases in our anticipated capital expenditures, other regulatory issues and related costs of compliance, and other events and changes constituted a “material adverse effect” under the merger agreement and also violated various representations, warranties and covenants in the merger agreement, thereby giving Western the right to terminate the merger transaction in its entirety.

 

On October 10, 2006, the Federal Trade Commission requested additional information concerning the merger from us and Western.

 

On November 2 and 3, 2006 our board held a special board meeting. Mr. Holliger described for the board Western’s position with respect to the transaction, and our special litigation counsel addressed the board concerning Western’s allegations and the implications with respect to the merger agreement and Giant’s on-going operations. The board instructed Mr. Holliger to communicate to Western that we were not interested in mutually terminating the merger agreement. Mr. Holliger communicated this to Mr. Foster.

 

On November 4, 2006, the general counsels of Western and Giant discussed whether further discussions between the parties could potentially avoid litigation and organized a meeting of the parties. On November 5 and 6, 2006, the parties, their corporate and litigation counsel, and their investment advisors met in Houston in an effort to settle their outstanding disputes. On November 6, 2006, a tentative settlement was reached that would reduce the merger consideration to $77.00 per share, eliminate virtually all of Western’s closing conditions, and allow Giant a 30-day “go-shop” period to see if it could obtain a better price for its stockholders. The settlement also amended Mr. Holliger’s consulting agreement, including reductions to the compensation payable thereunder.

 

From November 7 through November 12, 2006, the parties continued to negotiate the amendment to the merger agreement, and Mr. Holliger and his counsel negotiated with Western the amendment to the consulting agreement. Our board held special meetings on November 9 and 12, 2006 to discuss the negotiations and the amendment to the merger agreement. On November 12, 2006, our board received a fairness opinion from Deutsche Bank, the members of the board present approved the amendment to the merger agreement, and agreed to recommend the adoption of the amended merger agreement and approval of the merger to our stockholders. The amendment to the merger agreement was then executed by Western and us and the amendment to the consulting and non-competition agreements was executed by Western and Mr. Holliger.

 

We and Western announced the amendment to the merger agreement in a joint press release on November 13, 2006.

 

During the period from November 13, 2006 through December 13, 2006, under the supervision of the board, representatives of Deutsche Bank contacted parties that they believed, based on size and business interests, would be capable of, and might be interested in, consummating an acquisition of Giant. During this period, Deutsche Bank

contacted or was contacted by 23 parties, including both strategic and financial parties. Of these 23 parties, three entered into non-disclosure and standstill agreements with Giant and received a financial model and business plan. Of these three, two elected not to receive any further information about us.

 

The third, which we refer to in this proxy statement as Company Y, expressed an interest in moving forward. On November 23, 2006, Company Y’s investment advisor provided Deutsche Bank with a due diligence checklist, and we began providing various responses and materials to Company Y and its advisors. On December 6, 2006, members of our senior management and representatives from Deutsche Bank met with members of senior management of Company Y and its investment advisors at the offices of our outside counsel for due diligence discussions. On December 7, 9, 11 and 12, the chief executive officer of Company Y and Mr. Holliger discussed various aspects of a proposed transaction with Giant. On December 12, 2006, our board held a special meeting and received a report on the discussions with Company Y from Mr. Holliger. On December 13, 2006, the last day of the go-shop period, the chief executive officer of Company Y advised Mr. Holliger that Company Y would not be making an offer to acquire Giant because the value Company Y ascribed to Giant was too close to the $77.00 per share merger consideration Western agreed to pay to justify moving forward. Our board met on December 13, 2006, and Mr. Holliger advised the board that no offer would be forthcoming.

 

To date, no party has submitted an acquisition proposal to pursue a transaction involving the Company.

 

On November 22, 2006, we and Western were sued in a class action filed in the Maricopa County, Arizona Superior Court. The plaintiff in that action has alleged breach of fiduciary duties in connection with the amendments to the merger agreement. The suit seeks to enjoin the merger and other relief. We and Western believe the suit is without merit and intend to vigorously defend ourselves.

 

On December 26 and December 28, 2006, respectively, Western and we certified to the Federal Trade Commission substantial compliance with the request for additional information. We and Western have entered into a timing agreement with the Federal Trade Commission pursuant to which we agreed not to close the merger until at least 60 days after certification of substantial compliance and to provide the Federal Trade Commission at least 30 days notice of the planned closing date. The Federal Trade Commission has not yet agreed that we and Western are in substantial compliance, and we cannot assure you that they will agree that substantial compliance occurred in December, 2006. Further, the Federal Trade Commission may take the position there was an omission in Western’s original HSR Act filing and that the initial HSR Act 30-day waiting period has not yet commenced.

 

In the course of reaching its decision to approve the merger agreement, the amendment to the merger agreement and the merger, our board consulted with senior management and our financial and legal advisors, and reviewed a significant amount of information and considered a number of factors, including the following:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

In the course of its deliberations, our board also considered a variety of risks and other countervailing factors, including:

 

 

 

 

Our board concluded that these potentially negative factors were substantially outweighed by the opportunity presented by the merger for our stockholders to monetize their Giant investment for $77.00 per share in cash within a relatively short period of time if the merger conditions were satisfied, which the board believed would maximize the immediate value of their shares and eliminate the risk that the inherent uncertainty affecting the refining industry and our future prospects could result in a diminution in the market value of their shares. Accordingly, the board concluded that the merger was in the best interests of our stockholders.

 

The foregoing discussion of the factors considered by our board is not intended to be exhaustive but does set forth the principal factors considered by the board. Our board collectively reached the unanimous conclusion to approve the amended merger agreement and the merger in light of the various factors described above and other factors that each member of our board felt were appropriate. In view of the wide variety of factors considered by our board in connection with its evaluation of the merger and the complexity of these matters, our board did not consider it practical, and did not attempt, to quantify, rank or otherwise assign relative weights to the specific factors it considered in reaching its decision and did not undertake to make any specific determination as to whether any particular factor, or any aspect of any particular factor, was favorable or unfavorable to the ultimate determination of the board. Rather, our board made its recommendation based on the totality of information presented to and the investigation conducted by it. In considering the factors discussed above, individual directors may have given different weights to different factors.

 

After evaluating these factors and consulting with its legal counsel and its financial advisors, our board determined that the amended merger agreement was advisable and in the best interests of our stockholders. Under the supervision of our board, our financial advisors then used the “go-shop” period to actively solicit alternative proposals to acquire Giant in light of the reduced merger consideration provided for in the amended merger agreement. Although Deutsche Bank contacted or was contacted by 23 parties in this regard, none made a proposal

to acquire Giant. This strengthened our board’s conclusion that the amended merger agreement represented the best opportunity for our stockholders.

 

Accordingly, our board has unanimously approved the amended merger agreement and the merger. Our board recommends that you vote “FOR” the adoption of the amended merger agreement.

 

Pursuant to a letter agreement dated as of July 24, 2006, Deutsche Bank was engaged to act as our financial advisor. Our board of directors selected Deutsche Bank based on Deutsche Bank’s reputation and experience in the petroleum industry. At our board meeting on November 12, 2006, Deutsche Bank rendered its opinion that as of such date, and based upon and subject to the various qualifications, factors, assumptions and limitations described in the Deutsche Bank opinion , the $77.00 in cash per share to be received by holders of our common stock pursuant to the amended merger agreement was fair, from a financial point of view, to such holders.

 

The full text of Deutsche Bank’s opinion, which describes the various qualifications, factors, assumptions and limitations on the review undertaken by Deutsche Bank, is attached as Annex B to this proxy statement. Holders of our common stock are urged to, and should, read the Deutsche Bank opinion carefully and in its entirety. The Deutsche Bank opinion was addressed solely to our board of directors, was limited to the fairness, from a financial point of view, of the merger consideration to holders of our common stock as of the date of the opinion, and Deutsche Bank expressed no opinion as to the merits of the underlying decision by Giant to engage in the merger or as to how any holder of shares of Giant stock should vote with respect to the merger. The summary of the Deutsche Bank opinion set forth in this proxy statement is qualified in its entirety by reference to the full text of such opinion. The board of directors does not currently intend to seek an updated fairness opinion in connection with the merger.

 

In connection with its role as our financial advisor, and in arriving at its opinion, Deutsche Bank:

 

 

 

 

Deutsche Bank did not assume responsibility for independent verification of, and did not independently verify, any information, whether publicly available or furnished to it, concerning Giant or Western, including, without limitation, any financial information, forecasts or projections considered in connection with the rendering of its opinion. Accordingly, for purposes of its opinion, Deutsche Bank, with our permission, assumed and relied upon the accuracy and completeness of all such information. Deutsche Bank did not conduct a physical inspection of any of the properties or assets, and did not prepare or obtain any independent evaluation or appraisal of any of the assets or liabilities of Giant or Western. With respect to the financial forecasts and projections made available to Deutsche Bank and used in its analyses, Deutsche Bank assumed, with our permission, that they were reasonably prepared on bases reflecting, as of the date of the opinions, the best estimates and judgments of our management as to the matters

covered thereby. In rendering its opinion, Deutsche Bank expressed no view as to the reasonableness of such forecasts and projections or the assumptions on which they were based. Deutsche Bank’s opinion was necessarily based upon economic, market and other conditions as in effect on, and the information made available to it as of, the date of the opinion.

 

For purposes of rendering its opinion, Deutsche Bank assumed that the final terms of the amended merger agreement would not differ materially from the terms set forth in the draft that it reviewed. Deutsche Bank also assumed with our permission that, in all respects material to its analysis, the merger would be consummated in accordance with the terms of the amended merger agreement, without waiver, modification or amendment of any term, condition or agreement. Deutsche Bank further assumed that all material governmental, regulatory or other approvals and consents required in connection with the consummation of the merger would be obtained.

 

Deutsche Bank’s opinion was addressed to, and was for the use and benefit of, our board of directors, and was not a recommendation to holders of our common stock to approve the merger. Deutsche Bank’s opinion was limited to the fairness, from a financial point of view, of the merger consideration to holders of our common stock as of the date of the opinion, and Deutsche Bank expressed no opinion as to the merits of the underlying decision by Giant to engage in the merger or as to how any holder of shares of Giant stock should vote with respect to the merger.

 

Based upon and subject to the foregoing qualifications, limitations, factors and assumptions and those set forth in the opinion, Deutsche Bank was of the opinion that, as of November 12, 2006, the $77.00 in cash per share of our common stock to be received by the holders of our common stock pursuant to the amended merger agreement was fair, from a financial point of view, to such holders.

 

In preparing its opinion to our board of directors, Deutsche Bank performed a variety of financial and comparative analyses, including those described below. The summary of Deutsche Bank’s analyses described below is not a complete description of the analyses underlying its opinion. The preparation of an opinion is a complex process involving various determinations as to the most appropriate and relevant methods of financial analysis and the application of those methods to the particular circumstances and, therefore, an opinion is not readily susceptible to partial analysis or summary description. In arriving at its opinion, Deutsche Bank made qualitative judgments as to the significance and relevance of each analysis and factor that it considered. Accordingly, Deutsche Bank believes that its analyses must be considered as a whole and that selecting portions of its analyses and factors or focusing on information presented in tabular format, without considering all analyses and factors or the narrative description of the analyses, could create a misleading or incomplete view of the processes underlying its analyses and opinion.

 

In its analyses, Deutsche Bank considered industry performance, general business, economic, market and financial conditions and other matters, many of which are beyond the control of Giant. No company, transaction or business used in Deutsche Bank’s analyses as a comparison is identical to Giant or the proposed merger, and an evaluation of the results of those analyses is not entirely mathematical. Rather, the analyses involve complex considerations and judgments concerning financial and operating characteristics and other factors that could affect the acquisition, public trading or other values of the companies, business segments or transactions analyzed. The estimates contained in Deutsche Bank’s analyses and the ranges of valuations resulting from any particular analysis are not necessarily indicative of actual values or predictive of future results or values, which may be significantly more or less favorable than those suggested by the analyses. In addition, analyses relating to the value of businesses or securities do not purport to be appraisals or to reflect the prices at which businesses or securities actually may be sold. Accordingly, Deutsche Bank’s analyses and estimates are inherently subject to substantial uncertainty.

 

Deutsche Bank’s opinion and financial analyses were only one of many factors considered by the board of directors in its evaluation of the proposed merger and should not be viewed as determinative of the views of the board of directors or management with respect to the merger or the merger consideration.

 

The following is a summary of the material financial analyses underlying Deutsche Bank’s opinion dated November 12, 2006, delivered to our board of directors in connection with the merger at a meeting of our board on November 12, 2006. The financial analyses summarized below include information presented in tabular format. In order to understand fully Deutsche Bank’s financial analyses, the tables must be read together with the text of each summary. The tables alone do not constitute a complete description of the financial analyses. Considering the data

in the tables below without considering the full narrative description of the financial analyses, including the methodologies and assumptions underlying the analyses, could create a misleading or incomplete view of Deutsche Bank’s financial analyses.

 

Selected Public Company Analysis

 

Using publicly available information, Deutsche Bank reviewed the market values and trading multiples of the following publicly traded companies in the refining and related sectors, which Deutsche Bank deemed similar to Giant giving consideration to size, business mix and corporate structure (the “Selected Companies”):

 

 

Although the Selected Companies were compared to Giant for purposes of the analyses below, Deutsche Bank noted that no Selected Company is identical to Giant because of differences between the business mix, regulatory environment, operations and other characteristics of Giant and the Selected Companies. In evaluating the Selected Companies, Deutsche Bank made judgments and assumptions with regard to industry performance, general business, economic, regulatory, market and financial conditions and other matters, many of which are beyond the control of Giant, such as the impact of competition on Giant and on the industry generally, industry growth and the absence of any adverse material change on the financial condition and prospects of Giant, the industry or in the markets generally. Mathematical analysis (such as determining the average or median) is not in itself a meaningful method of using the data derived from the Selected Companies. Deutsche Bank calculated the financial multiples and ratios below based on publicly available financial data as of November 10, 2006.

 

Total Enterprise Value/EBITDA

 

The multiples analyzed on the basis of the Selected Companies included, among others, their respective total enterprise value as of November 10, 2006, divided by estimated 2006 earnings before interest, taxes, depreciation and amortization (“EBITDA”) and their respective total enterprise value divided by estimated 2007 EBITDA. The EBITDA estimates were the mean of estimates published by Institutional Brokers Estimate System (“IBES”) including analysts having published estimates during the months of August, September, October and November 2006 (“IBES consensus estimates”).

 

A summary of the market trading multiples of the Selected Companies as of November 10, 2006 are set forth below.

 

 

For purposes of its November 10, 2006 analysis, Deutsche Bank applied certain selected ranges of multiples based on the data above to our financial data. A selected range of 3.5x to 5.5x was applied to our estimated 2006 EBITDA to calculate an implied valuation range of $38.39 to $68.96. A selected range of 4.5x to 7.0x was applied to our estimated 2007 EBITDA to calculate an implied valuation range of $61.31 to $103.76. The EBITDA estimates were the IBES consensus estimates. Based upon these figures, Deutsche Bank calculated an average implied valuation range of $49.85 to $86.36.

 

Share Price/Earnings

 

The multiples analyzed on the basis of the Selected Companies also included, among others, their respective market capitalizations as of November 10, 2006, divided by estimated 2006 net income and their respective market capitalizations as of November 10, 2006, divided by estimated 2007 net income. The net income estimates were the IBES consensus estimates.

 

A summary of the market trading multiples of the Selected Companies as of November 10, 2006 are set forth below.

 

 

For purposes of its November 10, 2006 analysis, Deutsche Bank applied certain selected ranges of multiples based on the data above to our financial data. A selected range of 6.5x to 10.0x was applied to our estimated 2006 net income to calculate an implied valuation range of $40.13 to $61.71. A selected range of 7.5x to 11.0x was applied to our estimated 2007 net income to calculate an implied valuation range of $56.41 to $82.72. The net income estimates were the IBES consensus estimates. Based upon these figures, Deutsche Bank calculated an average implied valuation range of $48.27 to $72.22.

 

Analyst Price Targets

 

Deutsche Bank reviewed the range of publicly available equity research price targets for Giant as of November 10, 2006. This analysis resulted in a price target of $83.00 per share as of November 10, 2006. An analysis of the 12-month target price discounted at a rate of 12% resulted in a price target of $74.11 per share as of November 10, 2006. Analyst price targets do not provide insight on valuation as the targets had been conformed to the previously announced merger consideration of $83.00 per share set forth in the original merger agreement.

 

Selected Precedent Transaction Analysis

 

Deutsche Bank reviewed and compared the proposed financial terms of the Giant/Western merger to corresponding publicly available financial terms of selected transactions. For this analysis, Deutsche Bank reviewed certain corporate transactions from 2001 to the present in the energy industry’s refining and marketing sector and focused on the following transactions as of each transaction’s respective announcement date:

 

 

Deutsche Bank derived from the selected transactions listed above a reference range of total enterprise value divided by last twelve months (“LTM”) EBITDA. The multiple of total enterprise value to LTM EBITDA ranged from 5.3x to 6.7x for the selected transactions. Deutsche Bank then applied that range to Giant’s LTM EBITDA as of September 30, 2006, which resulted in an implied equity value range for Giant of $68.27 to $90.29 per share.

 

No company or transaction utilized in the selected precedent transactions analysis is identical to Giant or the merger. The selected precedent transaction analysis was not adjusted for various issues of comparability, including the exceptional refining margin environment in the period following hurricanes Katrina and Rita. In evaluating the precedent transactions, Deutsche Bank made judgments and assumptions with regard to industry performance, general business, economic, market and financial conditions and other matters, many of which are beyond the control of Giant, such as the impact of competition on Giant and the industry generally, industry growth and the absence of any adverse material change in the financial condition and prospects of Giant or in the financial markets in general. Mathematical analysis, such as determining the average or median, or the high or the low, is not in itself a meaningful method of using comparable transaction data.

 

Discounted Cash Flow Analysis

 

Deutsche Bank performed a discounted cash flow analysis by adding (a) the present value of the estimated future free cash flows that Giant could generate over the period from September 30, 2006 through December 31, 2010, and (b) the present value of Giant’s “terminal value” at December 31, 2010, and then adjusting these aggregate values to equity values by subtracting net debt as of September 30, 2006. Free cash flows were calculated as after-tax earnings before interest and taxes plus non-cash expenses, less capital expenditures and less increases in net working capital. Terminal value refers to the estimated total value of Giant at the end of the forecast period, inclusive of any debt obligations at the time, based on the same set of management projections used for the remainder of the discounted cash flow analysis. Deutsche Bank’s analysis used financial projections provided by our management. Its discounted cash flow analysis applied a terminal EBITDA multiple range of 4.0x to 5.5x to estimated trailing (2010) EBITDA as of December 31, 2010. Deutsche Bank used a discount rate range to discount cash flows back to present value, reflecting Giant’s estimated average cost of capital, of 9.5% to 11.0%. Based on this analysis, Deutsche Bank estimated a discounted cash flow valuation range of $53.97 to $77.40 per share.

 

* * *

 

As described above, Deutsche Bank’s opinion to our board of directors was among many factors taken into consideration by our board of directors in making its determination to approve the amended merger agreement and recommend the merger. Such decisions were solely those of our board of directors. The opinion of Deutsche Bank was provided solely to our board of directors and does not constitute a recommendation to any person, including the holders of our common stock, as to how such person should vote or act on any matter related to the merger.

 

Pursuant to the terms of the Deutsche Bank engagement letter, we have agreed to pay Deutsche Bank a fixed fee in connection with its fairness opinion that was not contingent upon the consummation of the merger. We also have agreed to pay Deutsche Bank fees that are contingent upon the consummation of the merger, and to reimburse Deutsche Bank for its expenses incurred in performing its services. In addition, we have agreed to indemnify Deutsche Bank and its affiliates (and their respective control persons, directors, officers, employees or agents) against certain liabilities and expenses arising out of Deutsche Bank’s engagement or any related transactions. No limitations were imposed on Deutsche Bank by us with respect to the investigations made or procedures followed by it in rendering its opinion.

 

Deutsche Bank is an affiliate of Deutsche Bank AG (which we will refer to with its affiliates as “DB Group”). One or more members of the DB Group have, from time to time, provided investment banking services to Western or its affiliates for which it has received compensation, including acting as joint book-running manager in an initial public offering of securities by Western, which closed in January 2006. It is anticipated that some of our indebtedness will be refinanced in connection with the merger and that proceeds of the refinancing will be used to discharge certain of that indebtedness which is held by one or more members of the DB Group. DB Group may provide investment and commercial banking services to Western in the future, for which DB Group would expect compensation. In the ordinary course of business, members of the DB Group may actively trade in the securities and other instruments and obligations of Giant and Western for their own accounts and for the accounts of their customers and, accordingly, may at any time hold long or short positions in those securities.

 

In connection with the original merger agreement, at our board meeting on August 25, 2006, Deutsche Bank rendered its opinion that as of such date, and based upon and subject to the various qualifications, factors, assumptions and limitations described in the Deutsche Bank opinion of that date, the $83.00 in cash per share to be

received by holders of our common stock pursuant to the original merger agreement was fair, from a financial point of view, to such holders. Stockholders may receive a copy of the original Deutsche Bank opinion upon request to Giant.

 

If the merger is completed, Giant common stock will be delisted from The New York Stock Exchange and deregistered under the Securities Exchange Act of 1934, as amended (which is referred to in this proxy statement as the Exchange Act), and Giant will no longer file periodic reports with the SEC, except as may be required with respect to any of Giant’s Senior Subordinated Notes that may remain outstanding after the effective time of the merger.

 

In considering the recommendation of our board with respect to the amended merger agreement, our stockholders should be aware that certain of our executive officers and directors have interests in the merger that may be different from, or in addition to, those of our stockholders generally. These interests may create potential conflicts of interest. Our board was aware of these potential conflicts of interest and considered them, among other matters, in reaching its decision to approve the amended merger agreement and the merger and to recommend that our stockholders vote in favor of adopting the amended merger agreement and approving the merger.

 

Consulting and Non-Competition Agreement between Fred L. Holliger and Western

 

As a condition to Western’s execution of the merger agreement, Fred L. Holliger, chairman of our board of directors and our chief executive officer, executed a consulting and non-competition agreement with Western that will become effective at the effective time of the merger. In connection with the amendment to the merger agreement, Mr. Holliger’s consulting agreement also was amended. The five-year consulting agreement, as amended, provides for the following compensation to Mr. Holliger:

 

 

 

Western also has agreed that if any compensation payable to Mr. Holliger under the consulting and non-competition agreement is deemed to be an “excess parachute payment” under applicable income tax laws and therefore subject to excise tax, Western will pay Mr. Holliger the amount of the excise tax and any tax on the amount of the payment made.

 

Mr. Holliger’s agreement contains noncompetition provisions that restrict Mr. Holliger’s ability to compete with Western or solicit Western’s employees, customers or suppliers to terminate their relationship with Western for a period of two years following the termination of the consulting and non-competition agreement.

 

In addition to the payments provided for in the consulting and non-competition agreement, along with other of our executive officers, Mr. Holliger also is entitled to the payments under his existing Giant employment agreement upon a termination of his employment without cause after a change in control, as more fully described in the following section.

 

Employment Agreements with our Executive Officers

 

At the effective time of the merger, our executive officers are required to resign their positions as officers of Giant. Western may, but is not required to, offer employment to some or all of our executive officers on the same basis as our other employees. Our employment agreements with Fred Holliger, Morgan Gust, Mark Cox and Kim

Bullerdick require us to make severance payments to them if their employment is terminated within three years following a change in control. The severance payments are equal to three times the executive’s base salary plus the average annual bonus paid to the executive for the three years prior to the fiscal year in which the termination occurs, but not less than 25% of the executive’s then base salary. In addition, if the severance payments are deemed to be “excess parachute payments” under applicable income tax laws and therefore subject to excise tax, Giant will pay the executive the amount of the excise tax and any tax on the amount of the payment made. The following table summarizes the severance payments payable to our executive officers under their employment agreements:

 

 

 

 

Merger Proceeds to be Received by Directors and Executive Officers

 

The following table summarizes the proceeds to be received by our directors and executive officers in connection with the merger from shares of our common stock and/or stock options beneficially owned by them. Shares will be exchanged for the right to receive $77.00 per share in cash as described in this proxy statement, and options will be cancelled in exchange for a cash payment for each share subject to the option equal to the difference between $77.00 and the option exercise price per share, less applicable withholding taxes. See “The Merger Agreement — Stock Options.” All of our executives hold shares of our common stock that are “restricted” and vest over a period of five years. As a result of the merger, the vesting will accelerate, and the shares of restricted stock will be treated the same as the outstanding shares of common stock. See “The Merger Agreement — Restricted Stock.”

 

 

 

 

Indemnification of Officers and Directors

 

Western has agreed that, for a period of six years following the effective time of the merger, it and Giant as the surviving corporation of the merger will indemnify our current and former directors and officers against losses arising out of or pertaining to the fact that those persons were directors or officers of Giant. Western has also agreed to cause the surviving corporation to maintain in effect for six years after the merger a directors’ and officers’ liability insurance policy covering the current and former officers and directors with respect to matters existing or occurring at or prior to the effective time of the merger. Western is not, however, required to pay an annual premium for the insurance in excess of 200% of the last annual premium we paid. Giant has the right, with Western’s consent, to satisfy the insurance requirement by purchasing a six year “tail” insurance policy.

 

Employee Benefits

 

Western has agreed to provide certain benefits to our employees generally and has agreed to honor our obligations set forth in certain of our plans, which may benefit our officers in addition to our other employees. In January 2007 bonuses were paid pursuant to our existing 2006 Management Discretionary Bonus Plan. The amended merger agreement also permits us to establish an additional bonus pool to be paid on the effective date of the merger to our employees in our board’s discretion. The maximum amount of bonuses that we are permitted to pay pursuant to both our 2006 Management Discretionary Bonus Plan and the additional bonus pool is $9.5 million. Our officers participated in the 2006 Management Discretionary Bonus Plan and are expected to participate in the additional bonus pool, but the amounts payable to officers under the additional bonus pool have not yet been determined by our board. Western will also continue in effect certain retiree medical coverage offered by Giant or provide equivalent coverage, subject to any terms and conditions of the coverage. Mr. Bullerdick also will be entitled to retiree medical coverage, subject to the terms and conditions of the coverage. See “The Merger Agreement — Benefit Arrangements.”

 

Mergers and acquisitions that may have an impact in the United States are subject to review by the Department of Justice and the Federal Trade Commission to determine whether they comply with applicable antitrust laws. Under the HSR Act, mergers and acquisitions that meet certain jurisdictional thresholds, such as the present transaction, may not be completed until the expiration of a waiting period that follows the filing of notification forms by both parties to the transaction with the Department of Justice and the Federal Trade Commission. The initial waiting period is 30 days, but this period may be shortened if the reviewing agency grants “early termination” of the waiting period, or it may be lengthened if the reviewing agency determines that an in-depth investigation is required and issues a formal request for additional information and documentary material. We and Western filed pre-merger notifications with the U.S. antitrust authorities pursuant to the HSR Act on September 7, 2006 and, in accordance with the original merger agreement, requested “early termination” of the waiting period. We were not granted early termination, and on or about October 10, 2006 the Federal Trade Commission requested additional information concerning the merger from us and Western. On December 26 and December 28, 2006, respectively, Western and we certified to the Federal Trade Commission substantial compliance with the request for additional information. We and Western have entered into a timing agreement with the Federal Trade Commission pursuant to which we agreed not to close the merger until at least 60 days after certification of substantial compliance and to provide the Federal Trade Commission at least 30 days notice of the planned closing date. The Federal Trade Commission has not yet agreed that we and Western are in substantial compliance, and we cannot assure you that they will agree that substantial compliance occurred in December, 2006. Further, the Federal Trade Commission may take the position there was an omission in Western’s original HSR Act filing and that the initial HSR Act 30-day waiting period has not yet commenced.

 

It is possible that any of the government entities with which filings are made may seek various regulatory concessions as conditions for granting approval of the merger. There can be no assurance that we will obtain the regulatory approvals necessary to complete the merger or that the granting of these approvals will not involve the imposition of conditions on completion of the merger or require changes to the terms of the merger. These

conditions or changes could result in conditions to the merger not being satisfied. See “The Merger Agreement — Conditions to the Merger.”

 

The following is a general discussion of certain material United States federal income tax consequences to our stockholders of the receipt of cash in exchange for shares of our common stock pursuant to the merger or upon the exercise of appraisal rights. This summary is based upon the provisions of the Internal Revenue Code of 1986, as amended, applicable current and proposed United States Treasury Regulations, judicial authority, and administrative rulings and practice, all of which are subject to change, possibly on a retroactive basis. This discussion assumes that the shares of our common stock are held as capital assets by a United States person (i.e., a citizen or resident of the United States or a domestic corporation). This discussion does not address all aspects of United States federal income taxation that may be relevant to a particular stockholder of ours in light of the stockholder’s personal investment circumstances, such as those stockholders of ours subject to special treatment under the United States federal income tax laws (for example, life insurance companies, dealers or brokers in securities or currencies, tax-exempt organizations, financial institutions, United States expatriates, foreign corporations and nonresident alien individuals), our stockholders who hold shares of our common stock as part of a hedging, “straddle,” conversion or other integrated transaction, or our stockholders who acquired their shares of our common stock through the exercise of employee stock options or other compensation arrangements. In addition, this discussion does not address any aspect of foreign, state or local or estate and gift taxation that may be applicable to our stockholders. We urge you to consult your own tax advisor to determine the particular tax consequences to you (including the application and effect of any state, local or foreign income and other tax laws) of the receipt of cash in exchange for shares of our common stock pursuant to the merger or upon the exercise of appraisal rights.

 

The receipt of cash in the merger or upon the exercise of appraisal rights will be a taxable transaction for United States federal income tax purposes. In general, for United States federal income tax purposes, a holder of shares of our common stock will recognize gain or loss equal to the difference between his or her adjusted tax basis in shares of our common stock converted to cash in the merger and the amount of cash received. Gain or loss will be calculated separately for each block of shares of our common stock (that is, shares of our common stock acquired at the same cost in a single transaction) converted to cash in the merger. If the shares of our common stock have been held for more than one year at the effective time of the merger, the gain or loss will be long-term capital gain or loss subject (in the case of stockholders who are individuals) to tax at a maximum United States federal income tax rate of 15%, and will be short-term capital gain or loss if, at the effective time of the merger, the shares of our common stock so converted to cash have been held for one year or less. The deductibility of a capital loss recognized on the exchange is subject to limitation.

 

Under the United States federal income tax backup withholding rules, unless an exemption applies, Western generally is required to and will withhold 28% of all payments to which a stockholder or other payee is entitled in the merger, unless the stockholder or other payee (1) is a corporation or comes within other exempt categories and demonstrates this fact or (2) provides its correct tax identification number (social security number, in the case of an individual, or employer identification number in the case of other stockholders), certifies under penalties of perjury that the number is correct (or properly certifies that it is awaiting a taxpayer identification number), certifies as to no loss of exemption from backup withholding, and otherwise complies with the applicable requirements of the backup withholding rules. Each stockholder of ours and, if applicable, each other payee, should complete, sign and return to the paying agent for the merger the substitute Form W-9 that the stockholders will receive with the letter of transmittal following completion of the merger in order to provide the information and certification necessary to avoid backup withholding, unless an applicable exception exists and is proved in a manner satisfactory to the paying agent. The exceptions provide that certain stockholders (including, among others, all corporations and certain foreign individuals) are not subject to these backup withholding and reporting requirements. In order for a foreign individual to qualify as an exempt recipient, however, he or she must submit a signed Form W-8BEN, “Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding.” Backup withholding is not an additional tax. Generally, any amounts withheld under the backup withholding rules described above can be refunded or credited against a holder’s United States federal income tax liability, if any, provided that the required information is furnished to the United States Internal Revenue Service in a timely manner.

 

The foregoing discussion of certain material United States federal income tax consequences is included for general information purposes only and is not intended to be, and should not be construed as, legal or tax advice to any holder of shares of our common stock. We urge you to consult your own tax advisor to determine the particular tax consequences to you (including the application and effect of any state, local or foreign income and other tax laws) of the receipt of cash in exchange for shares of our common stock pursuant to the merger or upon the exercise of appraisal rights.

 

The following is a summary of the material terms of the amended merger agreement. Because the amended merger agreement is the primary legal document that governs the merger, we urge you to carefully read the complete text of the merger agreement and the amendment to the merger agreement for their precise legal terms and other information that may be important to you. The merger agreement and the amendment to the merger agreement are included as Annex A to this proxy statement.

 

If all of the conditions to the merger are satisfied or waived in accordance with the amended merger agreement, Merger Sub, a wholly-owned subsidiary of Western created solely for the purpose of engaging in the transactions contemplated by the amended merger agreement, will merge with and into Giant. The separate corporate existence of Merger Sub will cease, and Giant will survive the merger and will become a wholly-owned subsidiary of Western. We sometimes refer to Giant after the merger as the surviving corporation.

 

The amended merger agreement provides that we will complete the merger on the first business day after satisfaction or waiver of the conditions to the completion of the merger described in the amended merger agreement, or at such other time as we and Western may agree. We intend to complete the merger as promptly as practicable, subject to receipt of stockholder approval and all requisite regulatory approvals. We refer to the time at which the merger is completed as the effective time. Although we expect to complete the merger during the first quarter of 2007 (assuming that we receive approval of the merger by the Federal Trade Commission by that time), we cannot specify when, or assure you that, we and Western will satisfy or waive all conditions to the merger.

 

At the effective time, the certificate of incorporation of the surviving corporation will be amended to read as the certificate of incorporation of Merger Sub, except that the name of Giant and its incorporator will continue, and the bylaws of Merger Sub will be the bylaws of the surviving corporation.

 

All of our directors and officers are required to resign at the effective time, and the directors and officers of Merger Sub immediately prior to the merger will become the directors and officers of the surviving corporation following the merger.

 

Upon completion of the merger, each share of our common stock issued and outstanding immediately prior to the effective time will be cancelled and converted into the right to receive $77.00 in cash, without interest and less applicable withholding taxes, other than shares held by stockholders who properly exercise and perfect their appraisal rights and any shares owned by us, Western or Merger Sub. Our stockholders are entitled to assert appraisal rights instead of receiving the merger consideration. For a description of these appraisal rights, please see “Appraisal Rights.”

 

Prior to the effective time of the merger, Western will appoint a paying agent that will make payment of the merger consideration to our stockholders. Western will deposit sufficient cash with the paying agent at or before the effective time of the merger in order to permit the payment of the merger consideration. Promptly after the effective time of the merger, the paying agent will mail to each holder of record of a certificate representing shares of our common stock a letter of transmittal and instructions explaining how to send his, her or its stock certificates to the paying agent. The paying agent will pay the merger consideration, less any withholding taxes required by law, to our stockholders promptly following the paying agent’s receipt of the stock certificate(s) and a properly completed letter of transmittal. In the case of book-entry or other uncertificated shares, the paying agent will pay the merger consideration, less any withholding taxes required by law, to our stockholders upon entry through a book-entry transfer agent of the surrender of such shares on a book-entry account statement. No interest will be paid or accrued to our stockholders on the cash payable upon the surrender of stock certificates. Western is entitled to cause the paying agent to deliver to it any funds that have not been distributed within 6 months after the effective time of the merger. After that date, holders of certificates who have not complied with the instructions to exchange their certificates will be entitled to look only to Western for payment of the applicable merger consideration, without interest.

 

You should not send your Giant stock certificates to the paying agent until you have received transmittal materials from the paying agent. Please do not return your Giant stock certificates with the enclosed proxy.

 

If any of your stock certificates have been lost, stolen or destroyed, you will be entitled to obtain the merger consideration after you make an affidavit of that fact and, if required by Western, post a bond as Western may direct as indemnity against any claim that may be made against Western with respect to your lost, stolen or destroyed stock certificates.

 

Concurrently with the execution of the original merger agreement, Western deposited $12.5 million into an escrow account. This amount was increased by Western to $25 million on November 30, 2006 because the waiting period applicable to the consummation of the merger has not expired or been terminated under the HSR Act. The deposit is payable to us as liquidated damages if we terminate the amended merger agreement due to Western’s breach or if the merger has not been consummated by April 30, 2007 because the waiting period applicable to the consummation of the merger has not expired or been terminated under the HSR Act or any waiting period or any required consent under any applicable state or foreign competition or antitrust law has not expired or been obtained. At the effective time, the deposit will be paid over to the paying agent for distribution to our stockholders.

 

As a result of the merger, shares of our restricted stock that normally vest over a period of five years will vest immediately prior to the effective time of the merger, and the shares of restricted stock will be treated the same as the outstanding shares of common stock.

 

As a result of the merger, options to purchase our common stock that are outstanding as of the effective time of the merger will be cancelled. At the effective time of the merger, the holders of those options will become entitled to receive a cash payment in an amount equal to the number of shares subject to the option multiplied by the difference between $77.00 and the per share option exercise price, less the applicable withholding taxes.

 

The amended merger agreement contains customary representations and warranties that we made to Western regarding, among other things:

 

 

 

 

In addition, Western and Merger Sub made representations and warranties to us regarding, among other things:

 

 

 

 

Many of our representations and warranties and covenants are qualified by a “catastrophic material adverse effect” standard. A “catastrophic material adverse effect” means, with respect to Giant, any change, event or effect that, individually or taken together with other changes, events or effects, is materially adverse to the business, assets and liabilities (taken together), financial condition or results of operation of Giant and its subsidiaries on a consolidated basis or the ability of Giant to consummate the merger transaction, except that the following will not be considered to constitute a catastrophic material adverse effect:

 

 

 

 

For purposes of determining whether a catastrophic material adverse effect has occurred, only those changes, events or effects that have resulted in or would reasonably be expected to result in losses, liabilities, claims, costs or damages, net of any available insurance, of $10.0 million or more prior to December 31, 2011 are considered. In addition, a catastrophic material adverse effect is not deemed to have occurred until all changes, events or effects considered are likely to result in aggregate losses, liabilities, claims, costs or damages, net of any available insurance, of $200.0 million or more prior to December 31, 2011.

 

Through the effective time of the merger, we have agreed that we will do the following:

 

 

 

 

 

 

During the same period, we have also agreed that, subject to certain exceptions, we will not do any of the following without the prior written consent of Western:

 

 

 

 

 

 

 

 

In addition, during the same period, Western has agreed that, subject to certain exceptions, it will not do any of the following:

 

 

 

Western may request that we commence a cash tender offer to purchase all of our outstanding 11% Senior Subordinated Notes due 2012 and/or our outstanding 8% Senior Subordinated Notes due 2014 and a consent solicitation in order to amend certain covenants contained in the indentures to which such Senior Subordinated Notes are subject. In the event that Western requests that we commence the debt tender offer and consent solicitation, Western has agreed to pay directly to the dealer manager and the information agent all compensation owed to them under their respective agreements, whether or not the merger is consummated. If we commence the debt tender offer and consent solicitation but the merger is not consummated for any reason other than our breach, Western will reimburse us for our costs up to $250,000. Western has informed us that they do not intend to request that we commence a cash tender offer for these notes, but that they intend to call the 8% Senior Subordinated Notes due 2014 for redemption pursuant to their terms, including the payment of the make-whole premium, promptly after the effective time of the merger, and that they intend to call the 11% Senior Subordinated Notes due 2012 for redemption pursuant to their terms, including the payment of a scheduled prepayment premium, promptly after May 15, 2007.

 

During the period beginning on November 13, 2006 and continuing until December 13, 2006, we and our officers, directors, employees, agents and representatives, including our investment bankers, attorneys and accountants, were permitted to and did initiate, solicit and encourage acquisition proposals by third parties. An acquisition proposal is defined in the amended merger agreement as an inquiry, proposal or offer with respect to a third party tender offer, merger, consolidation, business combination, sale of assets, sale of stock or joint venture or similar transaction involving our assets or stock, or an acquisition of our stock, business or assets in a single transaction or a series of related transactions. Despite our efforts, we did not receive any acquisition proposals during this time period.

 

After December 13, 2006, and until our stockholders adopt the amended merger agreement and approve the merger, we agreed not to solicit, initiate or encourage any acquisition proposal by a third party, or provide information to or participate in discussions or negotiations with a third party, except that we may provide information to and participate in discussions or negotiations with a third party if we receive an unsolicited bona fide acquisition proposal and if:

 

 

 

 

A superior proposal is an acquisition proposal that our board determines in good faith and after consultation with its financial advisors, taking into account all financial considerations, including the legal, financial, regulatory and other aspects of the acquisition proposal deemed relevant by our board, the identity of the third party making the acquisition proposal, and the conditions and prospects for completing the acquisition proposal, is reasonably likely to result in a transaction more favorable to our stockholders from a financial point of view than the merger.

 

We have agreed to promptly notify Western of our receipt of any acquisition proposal, request for information or inquiry with respect to any acquisition proposal, the material terms of any such acquisition proposal or inquiry, and the identity of the person making any such acquisition proposal or inquiry. We are also required to keep Western informed of any material changes, additions or adjustments to the terms of any such acquisition proposal or inquiry. We must also give Western written notice prior to our board participating in any such discussions or negotiations or provide any information to the third party.

 

Nothing in the amended merger agreement prohibits us from taking and disclosing a position to our stockholders with respect to a tender offer or from making any required disclosure to our stockholders if our board determines in good faith that failure to do so would be inconsistent with its obligations under applicable law.

 

Western has agreed that, for a period of six years following the effective time of the merger, it and Giant as the surviving corporation will indemnify Giant’s current and former directors and officers against losses arising out of or pertaining to the fact that those persons were directors or officers of Giant. Western has also agreed to cause the surviving corporation to maintain in effect for six years after the merger a directors’ and officers’ liability insurance policy covering the current and former officers and directors with respect to matters existing or occurring at or prior to the effective time of the merger. However, Western is not required to pay an annual premium for the insurance in excess of 200% of the last annual premium we paid. Giant has the right, with Western’s consent, to satisfy the insurance requirement by purchasing a six year “tail” insurance policy. For more information, please refer to “The Merger — Interests of Certain Persons in the Merger” and “— Indemnification of Officers and Directors.”

 

Western has agreed to honor, and cause its subsidiaries to honor, all employee benefit plans, contracts, agreements and binding commitments of Giant entered into prior to the date of the original merger agreement. In addition, Western has agreed that, for a period of at least 12 months following the merger, the benefits taken as a whole offered under Western’s or the surviving corporation’s benefit plans, programs, policies and arrangements to continuing employees will be no less favorable than the benefits offered to such employees prior to the merger. Continuing employees are those of our employees who continue as employees of the surviving corporation or its subsidiaries following the merger. Western has agreed to give continuing employees full credit for prior service with us for purposes of eligibility and vesting under Western’s employee benefits plans and the determination of benefits levels under Western’s employee benefits plans relating to vacation or severance. In addition, Western will implement a severance plan with respect to any of our employees whose employment is terminated without cause within 12 months following the date of the merger, which will pay such employees two week’s compensation for each year of service with Giant and one week for each year of service with a company acquired by Giant, up to a maximum of one year’s salary.

 

Western has agreed to honor our binding commitments set forth in our ESOP Substitute Excess Deferred Compensation Benefit Plan. Western also has agreed to make the allocations under the Giant Industries, Inc. and Affiliated Companies Deferred Compensation Plan and mandatory matching and 3% supplemental contributions under the Giant Industries & Affiliated Companies 401(k) Plan due up to the date of the merger, to the extent not made by Giant prior to the date of the merger, in each case as set forth in the amended merger agreement.

 

In January 2007, bonuses were paid pursuant to our existing 2006 Management Discretionary Bonus Plan. The amended merger agreement also permits us to establish an additional bonus pool to be paid on the effective date of

the merger to our employees in our board’s discretion. The maximum amount of bonuses that we are permitted to pay pursuant to our 2006 Management Discretionary Bonus Plan and the additional bonus pool is $9.5 million.

 

In addition, Western has agreed to pay any excise taxes imposed as a result of the merger on the compensation of employees who have employment agreements with Giant, including any tax on the amount of the payment made. Western will also continue in effect certain retiree medical coverage offered by Giant or provide equivalent coverage.

 

Our and Western’s obligations to effect the merger are subject to the satisfaction or waiver of the following conditions:

 

 

 

 

In addition, our obligation to effect the merger is subject to the satisfaction or waiver of the following conditions:

 

 

 

In addition, the obligation of Western and Merger Sub to effect the merger are subject to the satisfaction or waiver of the following conditions:

 

 

 

 

 

 

The amended merger agreement may be terminated and the merger may be abandoned at any time prior to the effective time of the merger (notwithstanding any approval by our stockholders):

 

 

 

 

 

 

 

 

 

 

The amended merger agreement obligates us to pay a termination fee to Western of $34 million, plus reimburse up to $1 million of Western’s expenses relating to the transactions contemplated by the amended merger agreement, if:

 

 

 

In the event that we terminate the amended merger agreement due to a Western breach, or if the merger has not been consummated by April 30, 2007 because the waiting period applicable to the consummation of the merger has not expired or been terminated under the HSR Act or any waiting period or any required consent under any applicable state or foreign competition or antitrust law has not expired or been obtained, then we are entitled to retain the $25 million deposit as liquidated damages as our sole remedy. See “The Merger — Deposit.”

 

If the amended merger agreement is terminated for any reason other than a termination by Western following our breach of the amended merger agreement, and as of the date of termination we have undertaken any debt tender offer at the request of Western, then Western shall reimburse us for our reasonable costs and expenses incurred in connection with the debt tender offer, up to $250,000. See “The Merger — Debt Tender Offer.”

 

The parties may amend the amended merger agreement at any time before or after adoption of the amended merger agreement by our stockholders. After stockholder approval has been obtained, however, the parties may not amend the amended merger agreement in a manner that by law requires further approval by our stockholders without obtaining such further approval.

 

Delaware law entitles the holders of shares of our common stock, who follow the procedures specified in Section 262 of the General Corporation Law of the State of Delaware, to have their shares appraised by the Delaware Court of Chancery and to receive “fair value” of these shares as of completion of the merger in place of the merger consideration, as determined by the court.

 

In order to exercise appraisal rights, a holder must demand and perfect the rights in accordance with Section 262.

 

The following description is intended as a brief summary of the material provisions of the Delaware statutory procedures required to be followed in order to perfect appraisal rights. This summary, however, is not a complete statement of all applicable requirements and is qualified in its entirety by reference to Section 262 of the General Corporation Law of the State of Delaware, the full text of which appears in Annex C to this proxy statement.

 

Section 262 requires that stockholders on the record date for the special meeting be notified not less than 20 days before the special meeting that appraisal rights will be available. A copy of Section 262 must be included with the notice. This proxy statement constitutes our notice to the holders of shares of our common stock of the availability of appraisal rights in connection with the merger in compliance with the requirements of Section 262. If you wish to consider exercising your appraisal rights, you should carefully review the text of Section 262 contained in Annex C to this proxy statement since failure to timely and properly comply with the requirements of Section 262 will result in the loss of your appraisal rights under Delaware law.

 

If you elect to demand appraisal of your shares, you must:

 

 

 

 

Neither voting (in person or by proxy) against, abstaining from voting on nor failing to vote on the proposal to adopt the amended merger agreement will constitute a written demand for appraisal within the meaning of Section 262 of the General Corporate Law of the State of Delaware. The written demand for appraisal must be in addition to and separate from any proxy or vote. If the written demand for appraisal is made in accordance with the requirements of Delaware law, failure to vote against the merger (that is, abstaining) will not operate as a waiver of the stockholder’s appraisal rights.

 

Only a holder of record of shares of our common stock is entitled to assert appraisal rights for the shares of common stock registered in that holder’s name. A demand for appraisal should be executed by or on behalf of the holder of record, fully and correctly, as his, her or its name appears on his, her or its stock certificates, and must state that such person intends thereby to demand appraisal of his, her or its shares of our common stock in connection with the merger. If the shares of our common stock are owned of record in a fiduciary capacity, such as by a trustee, guardian or custodian, execution of the demand should be made in that capacity, and if the shares of common stock are owned of record by more than one person, as in a joint tenancy and tenancy in common, the demand should be executed by or on behalf of all joint owners. An authorized agent, including two or more joint owners, may execute a demand for appraisal on behalf of a holder of record; however, the agent must identify the record owner or owners and expressly disclose the fact that, in executing the demand, the agent is agent for such owner or owners. A record holder, such as a broker who holds shares of our common stock as nominee for several beneficial owners, may exercise appraisal rights with respect to the shares of our common stock held for one or more beneficial owners while not exercising such rights with respect to the shares of our common stock held for other beneficial owners; in such case, however, the written demand should set forth the number of shares of our common stock as to which appraisal is sought and where no number of shares of our common stock is expressly mentioned, the demand will be presumed to cover all shares of our common stock which are held in the name of the record owner. Stockholders who hold their shares of our common stock in brokerage accounts or other nominee forms and who wish to exercise appraisal rights are urged to consult with their brokers to determine the appropriate procedures for the making of a demand for appraisal by such a nominee.

 

All demands for appraisal should be made in writing and addressed to the Corporate Secretary of Giant at 23733 North Scottsdale Road, Scottsdale, Arizona 85255 before the stockholder vote on the amended merger agreement and the merger is taken at the special meeting. The demand must reasonably inform us of the identity of the holder and the intention of the holder to demand appraisal of his, her or its shares of common stock. If your shares of our common stock are held through a broker, bank, nominee or other third party, and you wish to demand appraisal rights you must act promptly to instruct the applicable broker, bank nominee or other third party to follow the steps summarized in this section.

 

Within 10 days after the effective date of the merger, the surviving corporation must give written notice of the date the merger became effective to each holder who has properly filed a written demand for appraisal and has not voted in favor of the merger. At any time within 60 days after the effective date, any holder who has demanded an appraisal has the right to withdraw the demand and to accept the cash payment specified by the amended merger agreement for his or her shares of our common stock. Within 120 days after the effective date, either the surviving corporation or any holder who has complied with the requirements of Section 262 and who is otherwise entitled to appraisal rights, may file a petition in the Delaware Court of Chancery (which we refer to as the Chancery Court) demanding a determination of the fair value of the shares of our common stock held by all holders entitled to appraisal. Neither Giant nor Western has any intention or obligation to file such a petition. Accordingly, the failure of a holder to file a petition in the Chancery Court demanding a determination of the fair value of the shares within 120 days after the effective time could nullify the holder’s previously written demand for appraisal. Within 120 days after the effective time of the merger, any holder of our common stock who has complied with the requirements for

exercise of appraisal rights will be entitled, upon written request, to receive from the surviving corporation a statement setting forth the aggregate number of shares not voted in favor of the merger and with respect to which demands for appraisal have been received and the aggregate number of holders of such shares. The statement must be mailed to such holder within 10 days after a written request for the statement has been received by the surviving corporation or within 10 days after the expiration of the period for delivery of demands for appraisal, whichever is later.

 

If a petition for appraisal is duly filed by a holder and a copy of the petition is delivered to the surviving corporation, the surviving corporation will then be obligated, within 20 days after receiving service of a copy of the petition, to provide the Chancery Court with a duly verified list containing the names and addresses of all holders who have demanded an appraisal of their shares of our common stock and with whom agreements as to the value of their shares of our common stock have not been reached by the surviving corporation. After notice to dissenting holders of the time and place of the hearing of the petition, the Chancery Court is empowered to conduct such a hearing. At the hearing, the Chancery Court will determine those holders who have complied with Section 262 and who have become entitled to appraisal rights. The Chancery Court may require the holders who have demanded an appraisal for their shares of our common stock to submit their stock certificates to the Register in Chancery for notation of the pendency of the appraisal proceedings; and if any stockholder fails to comply with that direction, the Chancery Court may dismiss the proceedings as to that holder.

 

After determination of the holders entitled to appraisal of their shares of our common stock, the Chancery Court will appraise the shares, determining their fair value exclusive of any element of value arising from the accomplishment or expectation of the merger, together with a fair rate of interest, if any. When the fair value is determined, the Chancery Court will direct the payment of the value, with interest, if any, to the holders entitled to receive payment, upon surrender by such holders of the certificates representing the applicable shares of our common stock.

 

In determining fair value and the fair rate of interest, if any, the Chancery Court is required to take into account all relevant factors. You should be aware that the fair value of your shares of Giant common stock as determined under Section 262 could be more, the same, or less than the value that you are entitled to receive under the terms of the amended merger agreement.

 

Costs of the appraisal proceeding may be imposed upon the parties participating in the appraisal proceeding by the Chancery Court as the Chancery Court deems equitable in the circumstances. Upon the application of a holder, the Chancery Court may order all or a portion of the expenses incurred by any holder in connection with the appraisal proceeding, including, without limitation, reasonable attorneys’ fees and the fees and expenses of experts, to be charged pro rata against the value of all shares of our common stock entitled to appraisal.

 

Any holder who has demanded appraisal rights will not, from and after the effective date of the merger, be entitled to vote shares of Giant common stock subject to that demand for any purpose or to receive payments of dividends or any other distribution with respect to those shares, other than dividends or other distributions payable to our stockholders of record at a date prior to the effective date of the merger; however, if no petition for appraisal is filed within 120 days after the effective date of the merger, or if the holder delivers a written withdrawal of his or her demand for appraisal and an acceptance of the merger within 60 days after the effective date of the merger, then the right of that holder to appraisal will cease and that holder will be entitled to receive the cash payment for his, her or its shares of our common stock pursuant to the amended merger agreement. Any withdrawal of a demand for appraisal made more than 60 days after the effective date of the merger may only be made with the written approval of the surviving corporation. Notwithstanding the foregoing, no appraisal proceeding in the Chancery Court will be dismissed without the approval of the Chancery Court and may be subject to conditions the Chancery Court deems just.

 

In view of the complexity of Section 262, holders of shares of our common stock who may wish to pursue appraisal rights should promptly consult their legal advisors.

 

Our common stock is traded on The New York Stock Exchange under the symbol “GI.” The table below shows, for the periods indicated, the high and low closing sales prices for shares of our common stock as reported by The New York Stock Exchange.

 

 

On August 25, 2006, the last full trading day prior to the first public announcement of the proposed merger, our common stock closed at $71.79. On January 31, 2007, the last practicable trading day prior to the date of this proxy statement, our common stock closed at $74.87. Stockholders should obtain a current market quotation for our common stock before making any decision with respect to the adoption of the amended merger agreement and the approval of the merger. On January 26, 2007, there were approximately 212 holders of record of our common stock.

 

Our board of directors suspended the payment of cash dividends on our common stock in the fourth quarter of 1998. At the present time, we have no plans to reinstate such dividends. Under the amended merger agreement, we have agreed not to pay any cash dividends on our common stock before the closing of the merger or the termination of the amended merger agreement. Following the merger, there will be no further market for our common stock.

 

The following table sets forth information concerning the beneficial ownership of our common stock as of January 26, 2007 (unless otherwise noted) by (1) each of our current directors, (2) certain current executive officers, and (3) all current executive officers and directors as a group. Except as otherwise indicated, to our knowledge, all persons listed below have sole voting and investment power with respect to their shares, except to the extent that authority is shared by spouses under applicable law. Our only outstanding class of equity securities is our common stock.

 

 

 

 

 

 

 

 

The following table sets forth information concerning the beneficial ownership of our common stock as of January 26, 2007 (unless otherwise noted) by each stockholder who is known by us to own beneficially in excess of 5% of our outstanding common stock. Except as set forth below, no other person or entity is known by us to beneficially own more than 5% of our outstanding common stock.

 

 

 

 

 

 

 

Each of the entities has sole voting and dispositive power with respect to the shares noted except that Barclays Global Investors, NA has sole voting power only as to 828,511 shares.

 

 

 

 

Giant Industries, Inc. is a Delaware corporation headquartered in Scottsdale, Arizona. Giant, through its subsidiaries, is a refiner and marketer of petroleum products. Giant owns and operates one Virginia and two New Mexico crude oil refineries. In addition, Giant owns a crude oil gathering pipeline system based in Farmington, New Mexico, which services the New Mexico refineries. Giant also owns finished products distribution terminals in Albuquerque, New Mexico and Flagstaff, Arizona, a fleet of crude oil and finished product truck transports, and a chain of retail service station/convenience stores in New Mexico, Colorado, and Arizona. Giant is also the parent company of Phoenix Fuel Co., Inc., Dial Oil Co. and Empire Oil Co., all of which are wholesale petroleum products distributors. Our common stock is listed on The New York Stock Exchange under the symbol “GI.”

 

Western Refining, Inc. is a Delaware corporation headquartered in El Paso, Texas. Western is an independent crude oil refiner and marketer of refined products and operates primarily in the Southwestern region of the United States, including Arizona, New Mexico, and West Texas. Western’s common stock is listed on The New York Stock Exchange under the symbol “WNR.”

 

New Acquisition Corporation is a newly incorporated Delaware corporation and a direct, wholly-owned subsidiary of Western. New Acquisition Corporation was formed by Western exclusively for the purpose of effecting the merger. This is the only business of New Acquisition Corporation.

 

If the merger is consummated, we will not have public stockholders and there will be no public participation in any future meetings of stockholders. If the merger is not completed, however, we will hold our 2007 Annual Meeting of Stockholders. If such meeting is held, stockholder proposals submitted pursuant to Rule 14a-8 under the Exchange Act for inclusion in our 2007 annual proxy statement were required to be sent to us by November 1, 2006 at 23733 North Scottsdale Road, Scottsdale, Arizona 85255, Attention: Kim H. Bullerdick, Corporate Secretary. All stockholder proposals must also meet the requirements set forth in the rules and regulations of the SEC in order to be eligible for inclusion in our proxy statement for our 2007 annual meeting.

 

In the event you desire to present a proposal at our 2007 annual meeting without seeking to have the proposal included in our proxy statement, our proxies will not be allowed to use their discretionary voting authority in connection with the proposal if you provide a written statement to us telling us that you intend to deliver a proxy statement and form of proxy to holders of at least the percentage of our voting shares required under applicable law to approve the proposal. The statement must be provided to us within the time period specified in our bylaws for the receipt of stockholder notices. Our bylaws provide that notice of your proposal must be delivered to or mailed and received at our principal executive offices not less than 90 days nor more than 120 days prior to the annual meeting. In the event, however, that less than 100 days’ notice or prior public disclosure of the date of the meeting is given or made to stockholders, to be timely, your notice must be received by us not later than the close of business on the 10th day following the day on which the notice of the date of the meeting was mailed or public disclosure was made, whichever first occurs. Your notice to us must set forth as to each matter you propose to bring before the meeting:

 

 

 

You also must include the statement in your filed proxy materials. Immediately after you solicit the percentage of stockholders required to carry the proposal, you must also provide us with a statement from a solicitor or other person with knowledge confirming that the necessary steps have been taken to deliver a proxy statement and form of proxy to holders of at least the percentage of our voting shares required under applicable law to carry the proposal. All statements should be sent in writing to our corporate secretary at the address set forth on the first page of this proxy statement.

 

Each of Giant and Western files annual, quarterly and current reports, proxy statements and other information with the SEC under the Exchange Act. You may read and copy this information at, or obtain copies of this information by mail from, the SEC’s Public Reference Room, 100 F. Street NE, Washington, D.C. 20549, at prescribed rates. Please call the SEC at 1-800-SEC-0330 for further information about the public reference room.

 

The filings of Giant and Western with the SEC are also available to the public from commercial document retrieval services and at the web site maintained by the SEC at “http://www.sec.gov.”

 

YOUR VOTE IS IMPORTANT. Whether or not you plan to attend the special meeting, please sign and date the enclosed proxy card and return it promptly in the envelope provided or vote through the Internet or by telephone as described in the enclosed proxy card. Giving your proxy now will not affect your right to vote in person if you attend the meeting.

 

If you have any questions about this proxy statement, the special meeting or the merger or need assistance with the voting procedures, you should contact Georgeson Shareholder, our proxy solicitor, toll-free at (866) 425-8556.

 

 

AGREEMENT AND PLAN OF MERGER
BY AND AMONG
WESTERN REFINING, INC.,
NEW ACQUISITION CORPORATION
AND
GIANT INDUSTRIES, INC.
DATED AS OF AUGUST 26, 2006

 

TABLE OF CONTENTS