In a bid to bolster scale and diversify properties, Par Pacific Holdings, Inc.
(PARR - Free Report
) recently inked a deal to acquire privately-held downstream company, U.S. Oil & Refining Company. The transaction is valued at $358 million, plus net working capital. Houston-based Par Pacific is likely to finance the deal via $225-million secured term loan and $150 million of equity financing. Subject to satisfactory closing conditions and regulatory approvals, the deal is set for closure next January.
Par Pacific — whose operations are concentrated in Hawaii, Pacific Northwest and Rocky Mountains — is set to expand its mainland foothold by acquiring Tacoma, Washington-based U.S. Oil & Refining. The deal will bolster Par Pacific’s refinery capacity to create a diversified integrated downstream network. Notably, it possesses a 94,000-barrel per day (bpd) refinery and 91 retail outlets across Hawaii. The company also owns and operates a refinery in Wyoming, having a processing capacity of 18,000 bpd, as well as 33 retail outlets in the Rockies and Pacific Northwest.
The assets to be acquired by Par Pacific comprise a refinery with a processing capacity of 42,000 barrels per day, along with 2.9 million barrels of refined-product and crude-oil storage. The acquisition also incorporates a marine and fuel terminal, as well as unit train-capable rail-loading terminal.The refineries and logistic facilities serve the Pacific Northeast market.
Notably, U.S. Oil & Refining generated an adjusted EBITDA of $86 million in the trailing four quarters ended Sep 30, 2018. The buyout is likely to result in various operational and commercial synergies for Parr Pacific,and also lead to annual cost synergies of around $7.5-$12.5 million.
Notably, the deal is well in sync with Parr Pacific’s plans to strengthen downstream operations via smart acquisitions. Notably, in August 2018, the company entered into a $45-million deal to acquire assets from Island Energy, in a bid to expand fuel production.The buyout will bolster Par Pacific’s processing capacity at its refinery in Hawaii by about 28% to 120,000 bpd. Further, the acquisition of the assets will make Par Pacific better positioned to switch to lower sulfur marine fuels, as mandated by IMO 2020.
Zacks Rank and Key Picks
Par Pacific currently carries a Zacks Rank #3 (Hold).
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