Item 1.01 Entry into a Material Definitive Agreement.
Business Combination Agreement
On August 2, 2021, HollyFrontier Corporation ("HollyFrontier"), Hippo Parent
Corporation, a wholly owned subsidiary of HollyFrontier ("New Parent"), Hippo
Merger Sub, Inc., a wholly owned subsidiary of New Parent ("Parent Merger Sub"
and together with HollyFrontier and New Parent, the "HFC Parties"), The Sinclair
Companies ("Sinclair HoldCo"), and Hippo Holding LLC, a wholly owned subsidiary
of Sinclair HoldCo (the "Target Company"), entered into a Business Combination
Agreement (the "Agreement"). Pursuant to the Agreement, HollyFrontier will
acquire the Target Company by effecting (a) a holding company merger in
accordance with Section 251(g) of the Delaware General Corporation Law whereby
HollyFrontier will merge with and into Parent Merger Sub, with HollyFrontier
surviving such merger as a direct wholly owned subsidiary of New Parent (the
"HFC Merger") and (b) immediately following the HFC Merger, a contribution
whereby Sinclair HoldCo will contribute all of the equity interests of the
Target Company to New Parent in exchange for shares of New Parent, resulting in
the Target Company becoming a direct wholly owned subsidiary of New Parent (the
"Sinclair Oil Acquisition" and together with the HFC Merger, the "HFC
Transactions").
HFC Merger
Subject to the terms and conditions set forth in the Agreement, at the effective
time of the Parent Merger (the "Effective Time"), each share of common stock of
HollyFrontier, par value $0.01 per share ("HFC Common Stock") issued and
outstanding immediately prior to the Effective Time (other than any treasury
shares which are to be cancelled pursuant to the Agreement) will be
automatically converted into one validly issued, fully paid and nonassessable
share of common stock of New Parent, par value $0.01 per share ("New Parent
Common Stock").
Following the consummation of the HFC Merger, New Parent will assume
HollyFrontier's listing on the New York Stock Exchange ("NYSE") and will be
renamed "HF Sinclair Corporation".
Sinclair Acquisition
Subject to the terms and conditions set forth in the Agreement, immediately
after the Effective Time, Sinclair HoldCo will contribute the equity interests
in the Target Company to New Parent in exchange for 60,230,036 shares of New
Parent Common Stock (the "Sinclair Stock Consideration"). The Agreement also
provides for a cash payment between the parties related to certain working
capital, hydrocarbon inventory and other adjustment items. On a pro forma basis
following the closing, Sinclair HoldCo will own 26.75% of the outstanding common
stock of New Parent, and HollyFrontier's current stockholders will hold in the
aggregate 73.25% of the outstanding common stock of New Parent, based on
HollyFrontier's outstanding shares of common stock as of July 30, 2021. The
Sinclair Stock Consideration is subject to adjustment if, as a condition to
obtaining antitrust clearance for the Sinclair Transactions (as defined below),
HollyFrontier agrees to divest its Woods Cross Refinery Assets (as defined in
the Agreement) and the sales price for such assets does not exceed a threshold
provided in the Agreement. The issuance of the Sinclair Stock Consideration is
exempt from registration under Section 4(a)(2) of the Securities Act of 1933, as
amended (the "Securities Act").
Consummation of the HFC Transactions is subject to satisfaction or waiver of
certain customary conditions, including, among others (i) the approval of the
majority of the votes cast by holders of shares of HollyFrontier common stock
present in person or represented by proxy and entitled to vote at the special
meeting of the HollyFrontier stockholders in favor of the issuance of the
Sinclair Stock Consideration (the "Stockholder Approval"); (ii) the expiration
or early termination of the applicable waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and receipt of
other required regulatory consents and approvals; and (iii) the consummation of
the transactions contemplated by that certain Contribution Agreement, dated as
of August 2, 2021 (the "Contribution Agreement"), by and among Sinclair HoldCo,
Sinclair Transportation Company, a Wyoming corporation, and Holly Energy
Partners, L.P., a Delaware limited partnership (the "Partnership"), which will
occur immediately prior to the HFC Transactions (the "HEP Transactions" and
together with the HFC Transactions, the "Sinclair Transactions").
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The Agreement contains customary representations and warranties of
HollyFrontier, Sinclair Holdco, and the HFC Parties. The Agreement also contains
customary covenants, including a non-solicitation provision that restricts
HollyFrontier's ability to take certain actions, including to solicit or
initiate discussions or negotiations with third parties, regarding other
proposals to acquire HollyFrontier. In addition, the board of directors of
HollyFrontier is required to recommend that HollyFrontier's stockholders approve
the issuance of the Sinclair Stock Consideration, and may not rescind or modify
such recommendation, with limited exceptions.
The Agreement automatically terminates if the HEP Transactions are terminated.
The Agreement contains other customary termination rights, including (a) a
termination right for Sinclair HoldCo if, prior to obtaining the Stockholder
Approval, there is an Adverse Recommendation Change (as defined in the
Agreement) and (b) a termination right for HollyFrontier in connection with the
acceptance of a Superior Proposal (as defined in the Agreement), (c) a
termination right for each of HollyFrontier and Sinclair HoldCo if
(i) Stockholder Approval is not obtained at the special meeting convened
therefor, or (ii) under certain circumstances if the closing has not occurred by
May 2, 2022 (the "Outside Date"), except that the Outside Date can be extended
by either party by up to two 90 day periods to obtain any required antitrust
clearance.
Upon termination of the Agreement under certain circumstances, including, among
others, in the event HollyFrontier validly accepts a Superior Proposal or
HollyFrontier's board of directors withdraws its recommendation to HollyFrontier
stockholders to approve the issuance of the Sinclair Stock Consideration,
HollyFrontier will be required to pay Sinclair HoldCo a termination fee equal to
$200 million. In addition, if the Stockholder Approval is not obtained and the
Agreement is terminated, HollyFrontier will pay Sinclair HoldCo an amount equal
to $35 million as reimbursement for expenses.
The foregoing summary description of the Agreement and the HFC Transactions
contemplated thereby is subject to and qualified in its entirety by reference to
the Agreement, which is filed as Exhibit 2.1 hereto and incorporated by
reference herein.
The Agreement has been attached as an exhibit to this Current Report on Form 8-K
in order to provide investors and security holders with information regarding
its terms. It is not intended to provide any other financial information about
the parties thereto or their respective subsidiaries and affiliates. The
representations, warranties and covenants contained in the Agreement were made
. . .
Item 3.02 Unregistered Sale of Equity Securities.
The information set forth under the heading "Business Combination Agreement" in
Item 1.01 of this Current Report on Form 8-K is hereby incorporated by reference
in this Item 3.02 hereof.
Item 7.01 Regulation FD Disclosure.
On August 2, 2021, HollyFrontier and the Partnership issued a joint press
release announcing that HollyFrontier had entered into the Agreement disclosed
under the heading "Business Combination Agreement" in Item 1.01 hereof. A copy
of this press release is furnished as Exhibit 99.1 and incorporated by reference
herein.
HollyFrontier and the Partnership also issued an investor presentation in
connection with the Sinclair Transactions. A copy of this investor presentation
is furnished as Exhibit 99.2 and incorporated by reference herein.
The information provided in this Item 7.01 (including Exhibit 99.1 and
Exhibit 99.2) shall not deemed to be "filed" for the purposes of Section 18 of
the Securities Exchange Act of 1934, as amended, nor shall it be incorporated by
reference in any filing made by HollyFrontier pursuant to the Securities Act,
other than to the extent that such filing incorporates by reference any or all
of such information by express reference thereto.
Cautionary Statement Regarding Forward Looking Statements
This communication may contain or incorporate by reference statements or
information that are, include or are based on forward-looking statements within
the meaning of the safe-harbor provisions of the Private Securities Litigation
Reform Act of 1995. Forward-looking statements give expectations, intentions,
beliefs or forecasts of future events or otherwise for the future, and can be
identified by the fact that they relate to future actions, performance or
results rather than relating strictly to historical or current facts. Words such
as "anticipate(s)," "project(s)," "expect(s)," "plan(s)," "goal(s),"
"forecast(s)," "strategy", "intend(s)," "should," "would," "could," "believe,"
"may," and variations of such words and other words and expressions of similar
meaning are intended to identify such forward-looking statements. However, the
absence of such words or other words and expressions of similar meaning does not
mean that a statement is not forward-looking.
These forward-looking statements include, but are not limited to, statements
regarding the acquisition by HollyFrontier and the Partnership of Sinclair Oil
Corporation and Sinclair Transportation Company (collectively, "Sinclair"),
statements regarding the acquisition by HollyFrontier of the Puget Sound
Refinery from Shell (the "PSR Transaction"), pro forma descriptions of the
combined companies and their operations, integration and transition plans,
synergies, opportunities and anticipated future performance. Forward-looking
statements are inherently uncertain and necessarily involve risks that may
affect the business prospects and performance of HollyFrontier and/or the
Partnership, and they are not guarantees of future performance. These
forward-looking statements are
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based on assumptions using currently available information and expectations as
of the date thereof that HollyFrontier management believes are reasonable, but
that involve certain risks and uncertainties and may prove inaccurate.
Therefore, actual outcomes and results could materially differ from what is
expressed, implied or forecast in these statements. Any differences could be
caused by a number of factors including, but not limited to (i) HollyFrontier's
and the Partnership's failure to successfully close the Sinclair Transactions
or, once closed, integrate the operations of Sinclair with their existing
operations and fully realize the expected synergies of the Sinclair Transactions
or on the expected timeline; (ii) the satisfaction or waiver of the conditions
precedent to the proposed Sinclair Transactions, including, without limitation,
the receipt of the HollyFrontier stockholder approval for the issuance of New
Parent Common Stock at closing and regulatory approvals (including clearance by
antitrust authorities necessary to complete the Sinclair Transactions) on the
terms and timeline desired, (iii) risks relating to the value of the shares of
New Parent's common stock and the value of the Partnership's limited partner
common units to be issued at the closing of the Sinclair Transactions from sales
in anticipation of closing and by the Sinclair holders following the closing,
(iv) legal proceedings that may be instituted against HollyFrontier or the
Partnership following the announcement of the proposed Sinclair Transactions,
(v) HollyFrontier's failure to successfully close the PSR Transaction or, once
closed, integrate the operations of the Puget Sound Refinery with its existing
operations and fully realize the expected synergies of the PSR Transaction or on
the expected timeline; (vi) disruption the Sinclair Transactions may cause to
customers, vendors, business partners and HollyFrontier's and the Partnership's
ongoing business, (vii) the extraordinary market environment and effects of the
COVID-19 pandemic, including a significant decline in demand for refined
petroleum products in the markets we serve, risks and uncertainties with respect
to the actions of actual or potential competitive suppliers and transporters of
refined petroleum or lubricant and specialty products in HollyFrontier's and the
Partnership's markets, the spread between market prices for refined products and
market prices for crude oil, the possibility of constraints on the
transportation of refined products or lubricant and specialty products, the
possibility of inefficiencies, curtailments or shutdowns in refinery operations
or pipelines, whether due to infection in the work force or in response to
reductions in demand, effects of current and future governmental and
environmental regulations and policies, including the effects of current and
future restrictions on various commercial and economic activities in response to
the COVID-19 pandemic, and (viii) other factors, including those listed in the
most recent annual, quarterly and periodic reports of HollyFrontier and the
Partnership filed with the Securities and Exchange Commission ("SEC"), whether
or not related to either proposed transaction. All forward-looking statements
included in this report are expressly qualified in their entirety by the
foregoing cautionary statements. The forward-looking statements speak only as of
the date made and, other than as required by law, HollyFrontier and the
Partnership undertake no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise.
HollyFrontier assumes no, and expressly disclaims any, duty or obligation to
update or correct any forward-looking statement as a result of events, changes,
effects, states of facts, conditions, circumstances, occurrences or developments
subsequent to the date of this communication or otherwise, except as required by
law. Readers are advised, however, to consult any further disclosures
HollyFrontier makes in its filings with the SEC.
Additional Information and Where to Find It
The issuance of the Sinclair Stock Consideration in connection with the HFC
Transactions will be submitted to HollyFrontier's stockholders for their
consideration. In connection with the issuance of the Sinclair Stock
Consideration, HollyFrontier will (i) prepare a proxy statement for
HollyFrontier's stockholders to be filed with the SEC, (ii) mail the proxy
statement to its stockholders, and (iii) file other documents regarding the
issuance of the Sinclair Stock Consideration and the proposed HFC Transactions
with the SEC. This communication is not intended to be, and is not, a substitute
for such filings or for any other document that HollyFrontier may file with the
SEC in connection with the issuance of the Sinclair Stock Consideration or the
proposed HFC Transactions. SECURITY HOLDERS ARE URGED TO READ ALL RELEVANT
DOCUMENTS FILED WITH THE SEC, INCLUDING THE PROXY STATEMENT, CAREFULLY WHEN THEY
BECOME AVAILABLE, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION. The proxy
statement and other relevant materials (when they become available) and any
other documents filed or furnished by HollyFrontier with the SEC may be obtained
free of charge at the SEC's web site at www.sec.gov. In addition, security
holders will be able to obtain free copies of the proxy statement from
HollyFrontier by going to its investor relations page on its corporate web site
at www.hollyfrontier.com.
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Participants in Solicitation
HollyFrontier and its directors and certain of its executive officers and
employees may be deemed to be participants in the solicitation of proxies in
connection with the issuance of the Sinclair Stock Consideration. Information
about HollyFrontier's directors and executive officers is set forth in its
definitive proxy statement filed with the SEC on March 25, 2021. The proxy
statement is available free of charge from the sources indicated above, and from
HollyFrontier by going to its investor relations page on its corporate web site
at www.hollyfrontier.com. Additional information regarding the interests of
participants in the solicitation of proxies in connection with the issuance of
the Sinclair Stock Consideration will be included in the proxy statement and
other relevant materials HollyFrontier files with the SEC in connection with the
proposed HFC Transactions.
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Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
Exhibit No. Description
2.1* Business Combination Agreement, dated as of August 2, 2021, by
and among HollyFrontier Corporation, Hippo Parent Corporation,
Hippo Merger Sub, Inc., The Sinclair Companies, and Hippo Holding
LLC.
10.1* Stockholders Agreement, dated as of August 2, 2021, by and
among Hippo Parent Corporation, The Sinclair Companies, and the
stockholders set forth on Schedule I thereto, as may be amended
from time to time.
10.2 Letter Agreement, dated as of August 2, 2021, by and among
HollyFrontier Corporation and Holly Energy Partners, L.P.
99.1 Press Release, dated as of August 3, 2021.
99.2 Investor Presentation, dated as of August 3, 2021.
104 Cover Page Interactive Data File (embedded within the Inline XBRL
document).
* Schedules and exhibits have been omitted pursuant to Item 601(a)(5) of
Regulation S-K. The registrant will furnish supplementally to the Securities
and Exchange Commission upon request a copy of any omitted schedule.
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