HollyFrontier and Holly Energy Partners are to acquire Sinclair Oil Corporation and Sinclair Transportation Company from The Sinclair Companies.
Under the terms of HollyFrontier’s definitive agreement, HollyFrontier will acquire Sinclair’s branded marketing business and all commercial activities, renewable diesel business, and two Rocky Mountain-based refineries.
As part of the transaction, HollyFrontier will form a new parent company, HF Sinclair Corporation, which will replace HollyFrontier as the public company trading on the New York Stock Exchange NYSE. At the closing, existing shares of HollyFrontier will automatically convert on a one-for-one basis into shares of common stock of HF Sinclair, and HF Sinclair will issue approximately 60.2 million shares of common stock to Sinclair, representing 26.75% of the pro forma equity of HF Sinclair with a transaction value of approximately $1.8 billion based on HollyFrontier’s fully diluted shares of common stock outstanding and closing stock price on July 30, 2021.
HollyFrontier expects to seek the approval of its stockholders under applicable rules of the NYSE for the issuance of the HF Sinclair shares to Sinclair.
The transaction will allow HollyFrontier to accelerate its growth while increasing scale and diversification. It also allows the company to integrate downstream into branded wholesale distribution. HF Sinclair will drive incremental free cash flow growth through its expanded refining business, integrated distribution network, leading renewable diesel position and growing lubricants and specialties business.
Upon closing of the transaction, HollyFrontier’s existing senior management team will operate the combined company. Under the definitive agreements, Sinclair will be granted the right to nominate two directors to the HF Sinclair board of directors at the closing. The new company will be headquartered in Dallas, Texas, with combined business offices in Salt Lake City, Utah.
Under the terms of the HEP transaction, the company will acquire Sinclair’s integrated crude and refined products pipelines and terminal assets, including approximately 1,200 miles of pipelines, eight product terminals and two crude terminals with approximately 4.5 MMbbl of operated storage. In addition, HEP will acquire Sinclair’s interests in three pipeline joint ventures including: Powder Flats Pipeline (32.5% non-operated interest), Pioneer Pipeline (49.9% non-operated interest) and UNEV Pipeline (25% non-operated interest; HEP operates the pipeline and owns the remaining 75% interest).
The purchase price for the HEP transaction will consist of an equity issuance of 21 million HEP common units and the payment of $325m of cash, subject to customary closing adjustments, representing a transaction value of approximately $758m based on the closing price of HEP units on July 30, 2021.
Upon closing of the HEP transaction, HEP’s existing senior management team will continue to operate HEP. Under the definitive agreements, Sinclair will be granted the right to nominate one director to the HEP Board of Directors at the closing. HEP will continue to operate under the name Holly Energy Partners.
The transactions have been unanimously approved by both HollyFrontier’s and HEP’s board of directors and are expected to close in mid-2022, subject to customary closing conditions and regulatory clearance, including the expiration or termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act. In addition, the HFC transaction and the HEP transaction are cross-conditioned on each other.
“HollyFrontier was formed through a transformational merger that facilitated a decade of significant stockholder returns along with growth and diversification into lubricants and renewables. We believe these transactions with Sinclair represent a similar inflection point, marking the beginning of our next chapter as HF Sinclair,” said Mike Jennings, CEO of HollyFrontier and HEP.
For more information visit: www.hollyfrontier.com
