DALLAS--(BUSINESS WIRE)--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.
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.”