Holly Energy Partners, L.P., an oil and gas transportation company, has received approval from its board of directors to acquire 75% stake in UNEV Pipeline, LLC from HollyFrontier Corporation, a petroleum refiner, for a consideration of $315 million, subject to certain post-closing purchase price adjustments. All the entities are based in the US.
UNEV is is the owner of an approximate 400 mile, 12-inch refined products pipeline currently running from Woods Cross, Utah to Las Vegas, Nevada, related products terminals near Cedar City, Utah and Las Vegas, Nevada and other related assets.
The consideration of $315 million is expected to be paid with $260 million in cash and approximately 1 million Holly Energy common units valued at $55 million, issued to HollyFrontier.
In connection with the closing of the proposed transaction, HollyFrontier, the owner of Holly Energy's general partner, has agreed to forego its right to $1.25 million per quarter of incentive distributions from Holly Energy that the general partner would otherwise be entitled to receive over the 12 consecutive quarters following the closing of the transaction and an additional 4 quarters in certain circumstances.
HollyFrontier will also receive a profits interest that will be paid beginning the fifth year after the closing based on UNEV's EBITDA for the fourth year following the closing, by which it would be entitled in certain circumstances to receive 50% of Holly Energy's portion of UNEV's EBITDA over $30 million, until the earlier of reaching a cap or 20 years following the closing.
The transaction is expected to close in July 2012.
|Deal Value (US$ Million)
||UNEV Pipeline, LLC
||Holly Energy Partners, L.P.
||HollyFrontier Corporation (formerly Holly Corporation)
The transaction will allow Holly Energy to continue its growth in tariff-based revenues by purchasing an interest in this strategic common carrier refined products pipeline and is expected to be immediately accretive to Holly Energy's distributable cash flow. The transaction also represents a continuation of HollyFrontier's strategy of capitalizing its logistics assets in the most efficient manner and redeploying capital in its core refining and marketing operations.
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(Originally published June 29, 2012, in MarketLine Financial Deals Tracker.)