Alon USA Energy Inc's (ALJ.N) largest investor, Delek U.S. Holdings Inc (DK.N), offered to buy the smaller refiner in a deal that values the company at about $516 million.
Delek, which already holds about 47 percent of Alon USA, said both the companies are "currently undervalued."
Delek offered 0.44 of its shares for each outstanding share of Alon USA. Based on Delek's closing price of $16.42, the offer works out to $7.22 per share, a 16 percent discount.
Alon's shares closed at $8.60 on Thursday, valuing the company at $614.1 million. Delek had a market value of $1.02 billion.
Delek said it would not proceed unless the deal was approved by a special committee of Alon directors, who are independent of Delek.
The deal also has to be approved by a majority of Alon shareholders, excluding Delek and its affiliates.
Alon had 71.4 million shares outstanding as of July 25, according to a regulatory filing. (bit.ly/2dbErMo)
Tudor Pickering Holt & Co is Delek's financial adviser and Norton Rose Fulbright US LLP its legal counsel.
(Reporting by Arathy S Nair in Bengaluru; Editing by Don Sebastian)