HF Sinclair Corp. (DINO) has reached a deal to acquire the remaining ownership stake of its MLP spinoff Holly Energy Partners after a previous deal came up short.

The agreement, worth roughly $1.3 billion, provides Holly Energy unitholders with stock and cash consideration. Holly Energy common unitholders would receive a combination of 0.315 shares of HF Sinclair common stock and $4 in cash, without interest.

It continues a trend of refiners and energy majors buying up their midstream MLPs.

The proposed transaction consideration represents an approximate 2% premium to the closing price of HEP’s common units as of Aug. 15, the companies said in a joint press release on Aug. 16.

The merger agreement adds a $4 cash payout for the shares, representing an 83 cent per unit increase, or about 4% compared to the original offer of no cash and 0.3714 shares for each HEP unit, according to Tudor, Pickering, Holt & Co. analyst Matthew Blair.

“HEP has some key strategic assets, including the UNEV products pipeline from Salt Lake City into Las Vegas,” Blair wrote on Aug. 16. “While we weren’t crazy about the timing of the original offer in May ’23, overall, the deal should help reduce costs and simplify DINO’s structure.”

The deal follows other MLP roll-ups including those between Phillips 66 and Phillips 66 Partners; Valero Energy and Valero Energy Partners; and PBF Energy and PBF Logistics.

HF Sinclair already owns a 47% limited partner interest and a non-economic general partner interest in Holly Energy Partners. The MLP provides petroleum product and crude oil transportation, terminalling, and storage and throughput services to the petroleum industry, including HF Sinclair subsidiaries, according to HF Sinclair.

Blair noted that HF Sinclair also authorized a new $1 billion share repurchase program, which represents 9% of its market cap.

“Previously DINO had been locked out of open-market repurchases while the HEP negotiations were ongoing, although DINO was able to strike a $411 million direct repurchase from REH Company, which previously controlled the Sinclair assets,” Blair said. “DINO’s overall target is at least a 50% payout ratio, and we model a 2023 total capital return yield of 16%, which is in the top half of the group.”

HF Sinclair CEO and president Tim Go said the transaction “simplifies our corporate structure, reduces costs and further supports the integration and optimization of our portfolio.”

The transaction is expected to close in the fourth quarter, subject to the approval of HF Sinclair stockholders and HEP unitholders.

Barclays is acting as financial adviser to HF Sinclair and Vinson & Elkins and Richards, Layton & Finger are acting as HF Sinclair’s legal advisers.

Intrepid Partners is acting as financial adviser to the conflicts committee of the board of the ultimate general partner of the partnership. Gibson, Dunn & Crutcher and Morris, and Nichols, Arsht & Tunnell are acting as the conflicts committee’s legal advisers.

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