DALLAS, June 28, 2012 /PRNewswire/ -- HollyFrontier Corporation (NYSE:HFC) ("HollyFrontier") and Holly Energy Partners, L.P. (NYSE:HEP) ("Holly Energy") today announced that their respective Boards of Directors have approved the acquisition of HollyFrontier's 75% interest in UNEV Pipeline, LLC ("UNEV") by Holly Energy for $315 million, subject to certain post-closing purchase price adjustments. UNEV is the owner of an approximate 400 mile, 12-inch refined products pipeline currently running from Woods Cross, Utah to Las Vegas, Nevada, related products terminals near Cedar City, Utah and Las Vegas, Nevada and other related assets. The purchase price of $315 million is expected to be paid with $260 million in cash and approximately 1.0 million Holly Energy common units valued at $55 million, issued to HollyFrontier.
In connection with the closing of the proposed transaction, HollyFrontier, the owner of Holly Energy's general partner, has agreed to forego its right to $1.25 million per quarter of incentive distributions from Holly Energy that the general partner would otherwise be entitled to receive over the 12 consecutive quarters following the closing of the transaction and an additional 4 quarters in certain circumstances. HollyFrontier will also receive a profits interest that will be paid beginning the fifth year after the closing based on UNEV's EBITDA for the fourth year following the closing, by which it would be entitled in certain circumstances to receive 50% of Holly Energy's portion of UNEV's EBITDA over $30 million, until the earlier of reaching a cap or 20 years following the closing.
The closing of the proposed transaction is subject to the execution of definitive agreements, expiration (or early termination) of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, closing of an amendment to Holly Energy's credit facility to, among other things, increase the size of the facility, the delivery of final and satisfactory fairness opinions to the applicable committee of each Board, and other customary closing conditions. Both HollyFrontier and Holly Energy expect the proposed transaction will close in July 2012.Mike Jennings, CEO and President of HollyFrontier, and Matt Clifton, CEO and President of Holly Energy, said "This transaction allows Holly Energy to continue its record of steady growth in tariff-based revenues by purchasing an interest in this strategic common carrier refined products pipeline and is expected to be immediately accretive to Holly Energy's distributable cash flow. The transaction also represents a continuation of HollyFrontier's strategy of capitalizing its logistics assets in the most efficient manner and redeploying capital in its core refining and marketing operations." Holly Energy will host an investor conference call to provide more detail and to answer questions regarding the proposed transaction after the closing of the transaction.