HF Sinclair to acquire Holly Energy Partners in stock-cash deal

In a significant development poised to reshape the energy landscape, HF Sinclair Corporation (NYSE: DINO) has unveiled plans to merge with Holly Energy Partners, L.P. (NYSE: HEP). As per the agreement, HF Sinclair will acquire all outstanding common units of HEP, in a deal that merges stock and cash components. The transaction underscores HF Sinclair’s strategy to bolster its position in the petroleum and energy sector.

HF Sinclair, a Dallas-based independent energy powerhouse, is renowned for producing and marketing premium light products, ranging from gasoline, diesel, and jet fuel to renewable diesel. With a strategic footprint across Kansas, Oklahoma, New Mexico, Wyoming, Washington, and Utah, HF Sinclair primarily serves the Southwest U.S., the Rocky Mountains, and several Plains states.

On the other hand, Holly Energy Partners, also headquartered in Dallas, offers a suite of essential services to the petroleum industry. This includes the transportation, storage, and throughput of petroleum product and crude oil. The company’s vast infrastructure encompasses pipelines, tankage, terminals, and refinery processing units spread across multiple states, from Colorado to Wyoming.

Breaking down the merger specifics, holders of HEP’s Common Units will receive a blend of 0.315 shares of HF Sinclair’s Common Stock and a $4 cash consideration. This arrangement results in an approximately 2% premium on HEP’s Common Unit’s closing price as of August 15, 2023.

Emphasizing the transformative nature of the deal, HF Sinclair’s CEO and President, Tim Go, remarked, “This strategic move aligns with our vision of corporate simplification, cost-cutting, and portfolio optimization. We anticipate the merger to augment our earnings per share and boost free cash flow within the inaugural year, fortifying our commitment to reward shareholders.”

Post-merger, Holly Energy Partners will transition into a fully-owned subsidiary under the HF Sinclair banner, concluding its stint as a publicly traded partnership.

The merger, slated for completion in Q4 2023, awaits the green light from HF Sinclair and HEP stakeholders and hinges on meeting specific customary conditions.

On the advisory front, HF Sinclair is partnering with Barclays for financial consultation, supported by legal insights from Vinson & Elkins L.L.P. and Richards, Layton & Finger, P.A. In contrast, Intrepid Partners, LLC is guiding the board’s conflicts committee, with Gibson, Dunn & Crutcher LLP, and Morris, Nichols, Arsht & Tunnell LLP providing legal expertise.