By OGJ editors
HOUSTON, Apr. 9 -- Frontier Oil Corp., Houston, and Holly Corp., Dallas, have agreed to merge, and the anticipated resulting combined company, Frontier Oil Corp., will own five refineries with capacity of more than 260,000 b/d.
The transaction remains subject to government regulatory approvals, but both companies' boards unanimously approved the merger. The deal's completion is expected by the third quarter.
Holly stockholders are expected to receive one share of Frontier common stock for each outstanding share of Holly common stock, plus a $172.5 million cash payment. The stock and cash merger consideration would have a value of $28.96/share, representing a premium of 31% to Holly's stockholders based on Mar. 28 closing prices.
Previously, Holly agreed to acquire ConocoPhillips' 25,000 b/d Woods Cross refinery near Salt Lake City and related assets for $25 million (OGJ Jan. 6, 2003, p. 31).
James Gibbs, Frontier's chairman, president, and CEO, said, "After diligently looking for the right opportunity for over a year, we believe this is the best possible strategic combination for both companies."
Holly Chairman and CEO Lamar Norsworthy said, "This merger allows our stockholders to continue to participate in this significantly larger, more geographically diversified, and more widely followed company through their almost 40% ownership in the combined company."
After the merger, Gibbs will be Frontier's president and CEO, and Norsworthy will be its chairman. The board will consist of equal numbers of directors from each company.
The transaction is expected to be non-taxable to the shareholders of both companies, except for the cash to be received by Holly stockholders. In addition, Holly stockholders will retain interest in any future litigation awards regarding jet fuel sales to the US government.
Frontier operates an 110,000 b/d refinery in El Dorado, Kan., and a 46,000 b/d refinery in Cheyenne, Wyo.
Holly operates a 60,000 b/d refinery in Artesia, NM, that is being expanded to 75,000 b/d and a 7,500 b/d refinery in Great Falls, Mont. Holly also operates 2,000 miles of crude oil and refined product pipelines in West Texas and New Mexico region along with Permian basin crude gathering operations and refined product terminals.
