HollyFrontier (HFC) - Get HollyFrontier Corporation (HFC) Report and Holly Energy Partners (HEP) - Get Holly Energy Partners, L.P. Report agreed to buy two units of Sinclair Cos., the Salt Lake City oil and gas exploration and production company.
The units in the deal are Sinclair Oil and Sinclair Transportation.
In the HollyFrontier deal, the company plans to form a new Dallas parent, HF Sinclair, which will replace HollyFrontier on the New York Stock Exchange. HF Sinclair will then issue 60.2 million shares to Sinclair, the company said.
That's 26.75% of HF Sinclair, valued at $1.8 billion, based on HollyFrontier’s closing stock price on July 30.
HollyFrontier shares recently traded at $28.50, down 1.5%. They rose 2% in the six months through Monday. Holly Energy was off 1.1% at $19.90.
In the HollyFrontier deal, the company gets Sinclair's branded marketing business and all commercial activities; renewable diesel business, and two Rocky Mountain-based refineries.
The deal enables HollyFrontier "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.”
The move should add to HF Sinclair’s earnings, cash flow and free cash flow within the first full year after closing, HollyFrontier said. And it will "enable the combined company to increase its commitment to return cash to stockholders," it said.
In the Holly Energy Partners deal, HEP gets Sinclair's integrated crude and refined products pipelines and terminal assets, and other operations. HEP will pay $758 million, including $325 million of cash and issuance of 21 million units.
HollyFrontier expects the deals to close in mid-2022, subject to conditions including antitrust clearance. Each of the two deals is conditioned on the other one closing.
In May, the company agreed to buy Puget Sound Refinery, suspending its dividend for a year to help fund the deal.