HollyFrontier Corporation (NYSE: HFC) (“HollyFrontier”) and
Holly Energy Partners, L.P. (NYSE: HEP) (“Holly Energy”) announced
today that Holly Energy and HEP Logistics Holdings, L.P. (“HEP
GP”), a wholly-owned subsidiary of HollyFrontier and the general
partner of HEP, have entered into a definitive agreement to
eliminate the incentive distribution rights held by HEP GP and
convert HEP GP’s 2% general partner interest in Holly Energy into a
non-economic interest in exchange for the issuance by Holly Energy
of 37,250,000 of its common units to HEP GP, representing total
equity value of $1.25 billion based on Holly Energy’s previous
closing day price of $33.56. In addition, HollyFrontier has agreed
to waive $2.5 million of limited partner cash distributions for
each of twelve consecutive quarters beginning with the first
quarter the units issued as consideration are eligible to receive
distributions. Upon closing of the transaction, HollyFrontier will
hold approximately 59.6 million Holly Energy common units,
representing approximately 59% of the outstanding common units,
with a market value of $2.0 billion based on Holly Energy’s
previous closing day price.
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The terms of the transaction were unanimously approved by the
Board of Directors of HollyFrontier based on the unanimous approval
and recommendation of its Audit Committee, which is comprised of
independent directors. The terms of the transaction were also
unanimously approved by the Board of Directors of Holly Logistic
Services, L.L.C., a wholly-owned subsidiary of HollyFrontier and
the general partner of HEP GP (“HEP GP LLC”), based on the
unanimous approval and recommendation of its Conflicts Committee,
which is comprised of independent directors.
The transaction is subject to customary closing conditions,
including expiration or termination of the Hart-Scott Rodino
antitrust waiting period. Closing of the transaction is expected to
occur in the fourth quarter of 2017.
George Damiris, President and Chief Executive Officer of Holly
Energy, commented, “We are pleased to announce this important
transaction for both Holly Energy and HollyFrontier. Eliminating
the general partner’s IDRs and the economic GP interest will
strongly enhance Holly Energy’s ability to pursue growth
opportunities and manage its business over the long-term by
decreasing its cost of capital, and providing increased
transparency on the value of HollyFrontier’s ownership in Holly
Energy.”
HollyFrontier and Holly Energy have scheduled a conference call
to discuss the restructuring for October 19, 2017 at 8:30 am
Eastern time. The conference call may be accessed by webcast at:
https://event.webcasts.com/starthere.jsp?ei=1166751&tp_key=6c5a60ca42
About HollyFrontier Corporation:
HollyFrontier Corporation, headquartered in Dallas, Texas, is an
independent petroleum refiner and marketer that produces high value
light products such as gasoline, diesel fuel, jet fuel and other
specialty products. HollyFrontier operates through its subsidiaries
a 135,000 barrels per stream day ("bpsd") refinery located in El
Dorado, Kansas, a 125,000 bpsd refinery in Tulsa, Oklahoma, a
100,000 bpsd refinery located in Artesia, New Mexico, a 52,000 bpsd
refinery located in Cheyenne, Wyoming and a 45,000 bpsd refinery in
Woods Cross, Utah. HollyFrontier markets its refined products
principally in the Southwest U.S., the Rocky Mountains extending
into the Pacific Northwest and in other neighboring Plains states.
In addition, HollyFrontier, through its subsidiary, owns
Petro-Canada Lubricants Inc., whose Mississauga, Ontario facility
produces 15,600 barrels per day of base oils and other specialized
lubricant products, and owns a 36% interest (including a 2% general
partner interest) in Holly Energy Partners, L.P.
About Holly Energy Partners, L.P.:
Holly Energy Partners, L.P., headquartered in Dallas, Texas,
provides petroleum product and crude oil transportation,
terminalling, storage and throughput services to the petroleum
industry, including HollyFrontier Corporation subsidiaries. The
Partnership, through its subsidiaries and joint ventures, owns
and/or operates petroleum product and crude gathering pipelines,
tankage and terminals in Texas, New Mexico, Arizona, Washington,
Idaho, Oklahoma, Utah, Nevada, Wyoming and Kansas as well as
refinery processing units in Kansas and Utah.
Advisors:
Morgan, Lewis & Bockius LLP is serving as legal advisor to
HollyFrontier. Barclays is serving as exclusive financial advisor
and Potter Anderson & Corroon LLP is serving as legal advisor
to the Audit Committee of the Board of Directors of HollyFrontier.
Bracewell LLP and Vinson & Elkins LLP are serving as legal
advisors to HEP. Jefferies LLC is serving as exclusive financial
advisor and Akin Gump Strauss Hauer & Feld LLP and Morris,
Nichols, Arsht & Tunnell LLP are serving as legal advisors to
the Conflicts Committee of the Board of Directors of HEP GP
LLC.
HFC & HEP Forward Looking Statement:
The statements contained herein relating to matters that are not
historical facts are "forward-looking statements" within the
meaning of the federal securities laws. These statements are based
on HollyFrontier's and Holly Energy’s beliefs and assumptions using
currently available information and expectations as of the date
hereof, are not guarantees of future performance and involve
certain risks and uncertainties. Although HollyFrontier and Holly
Energy believe that such expectations reflected in such
forward-looking statements are reasonable, HollyFrontier and Holly
Energy cannot give assurance that such expectations will prove to
be correct. Therefore, actual outcomes and results could materially
differ from what is expressed, implied or forecast in these
statements. Any differences could be caused by a number of factors
including, but not limited to:
- failure of HEP GP and Holly Energy to
successfully close the transaction;
- failure to receive required
governmental approvals to close the transaction;
- the availability and cost of additional
debt and equity financing;
- the possibility of reductions in
production or shutdowns at HollyFrontier refineries;
- the effects of current and future
government regulations and policies;
- HollyFrontier’s and Holly Energy’s
operational efficiency in carrying out routine operations and
capital construction projects;
- the possibility of terrorist attacks
and the consequences of any such attacks;
- general economic conditions; and
- other financial, operations and legal
risks and uncertainties detailed from time to time in
HollyFrontier’s and Holly Energy’s Securities and Exchange
Commission filings.
The forward-looking statements speak only as of the date made
and, other than as required by law, we undertake no obligation to
publicly update or revise any forward-looking statements, whether
as a result of new information, future events or otherwise.
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HollyFrontier CorporationHolly Energy Partners, L.P.Craig Biery,
214-954-6510Director, Investor RelationsorJared Harding,
214-954-6510Investor Relations
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