HollyFrontier Drops Down Assets

Holly Energy Partners LP (NYSE: HEP) plans to buy a 75% interest in a 400-mile, 12-inch refined products pipeline from its general partner, HollyFrontier Corp. (NYSE: HEP), for $315 million in cash and stock.

The purchase price of $315 million is expected to be paid with $260 million in cash and approximately 1.0 million Holly Energy common units valued at $55 million, issued to HollyFrontier.

The Unev Pipeline runs from Woods Cross, Utah to Las Vegas, Nevada.

As part of the transaction, HollyFrontier 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 (earnings before taxes, interest, depreciation and amortization) 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. Both Holly Energy and HollyFrontier are based in Dallas, Texas.