And the Dallas company suspended its quarterly dividend for a year to help fund the deal.
At last check HollyFrontier shares were trading 8.9% lower at $33.
HollyFrontier said it would buy Puget Sound Refinery. Anacortes, Wash., from the Shell Oil Products unit of Royal Dutch Shell (RDS.A) - Get Report. It'll pay $350 million plus hydrocarbon inventory to be valued at closing. The inventory's current value is estimated at $150 million to $180 million.
The company expects the deal to position it in West Coast product markets with strong demand, which will increase the scale and geographic footprint of its refining operations, Bloomberg News reports.
HollyFrontier also said it expected the transaction to immediately add to earnings per share and free cash flow.
The company expects the transaction to close in the fourth quarter, subject to conditions including regulatory clearances.
In a note, Cowen analyst Jason Gabelman said that investor feedback on the deal has been “decidedly bearish,” Bloomberg reported.
Mizuho analyst Silvio Micheloto said in a note “the deal could prove to be the right move long-term, but other West Coast refineries have missed expectations.” He rates the stock neutral with a $40 price target.
The dividend is suspended for a year, effective with the first-quarter payout. HollyFrontier expects to resume the dividend thereafter.
HollyFrontier swung to a first-quarter profit of 90 cents a share from a year-earlier loss of $1.88 a share. Revenue rose 3.1% to $3.5 billion.
Analysts surveyed by FactSet reached a consensus estimate of a loss of 47 cents a share on revenue of $2.82 billion.