The proposed merger is anticipated to close in the fourth quarter of 2023. Credit: Gajus/Shutterstock.

US-based independent energy company HF Sinclair has signed a definitive merger agreement with Holly Energy Partners (HEP), an oil pipeline operator.

Under the terms of the agreement, HF Sinclair will acquire all the outstanding shares of HEP that HF Sinclair or its affiliates do not already own.

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The cash and stock deal will see HF Sinclair offer a combination of 0.315 shares of its common stock and $4 for each HEP stock owned by shareholders.

According to Reuters, the deal is valued at $1.44bn.

Following the transaction, HEP will cease to be a publicly traded company and become a wholly owned subsidiary of HF Sinclair.

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The merger is expected to streamline corporate operations, cut expenses, and aid in HF Sinclair’s portfolio integration and optimisation.

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Currently, HF Sinclair owns a non-economic general partner share and a 47% limited partner stake in HEP.

HF Sinclair CEO and President Tim Go said: “We are pleased to announce this strategic transaction, which we believe simplifies our corporate structure, reduces costs and further supports the integration and optimization of our portfolio.

“We expect the transaction to be accretive to earnings per share and available free cash flow within the first 12 months, further supporting our capital allocation strategy of returning excess cash to shareholders.”

The proposed transaction is anticipated to close in the fourth quarter of 2023.

It is subject to approval from the shareholders of HF Sinclair and HEP as well as the fulfilment of some standard closing conditions.

HF Sinclair was formed after HollyFrontier and HEP agreed to buy Sinclair Oil’s assets in a deal valued at $2.6bn in 2021.