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Valero to buy rival, create biggest N. American refiner

DALLAS -- Valero Energy Corp.'s $6.9 billion purchase of Premcor Inc. -- a deal that would create the largest oil refiner in North America -- comes as high prices drive up the industry's profit margins.

Analysts said Valero's move is unlikely to offer immediate help to motorists weary of paying more than $2 a gallon for gasoline. But company officials pledged to improve efficiency and capacity at the four refineries being bought, which could eventually ease pressure on prices.

Valero hopes to complete the deal by Dec. 31 but could face regulatory hurdles. Both Valero and Premcor operate large refineries in the Northeast. Valero's chairman, William Greehey, predicted regulators will approve the acquisition because they let Sunoco Inc., the largest refiner in the region, buy a New Jersey refinery from El Paso Corp. last year. If not, Valero could walk away from the deal, he suggested.

San Antonio-based Valero said it would buy Connecticut-based Premcor's four refineries in a move that will increase the capacity of its refinery network by nearly one-third. The transaction would boost Valero's annual revenue to nearly $70 billion.

The deal is the latest in a long run of mergers and reflects growing optimism that refiners, once considered a low-profit business, will be helped for several years by strong energy demand.

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