Reuters reported last Friday that U.S. oil refiner HollyFrontier Corp is in advanced talks to acquire Suncor Energy Inc's Petro-Canada lubricants division for a little over $1 billion, after submitting the highest bid in an auction, according to people familiar with the matter.
The auction for the Petro-Canada lubricants business attracted other companies and private equity firms. Negotiations have not been finalized and the outcome could still change, sources cautioned.
Earlier this year, in June, it was reported that Suncor Energy had launched an auction of its Petro-Canada lubricants division. The sale was expected at that time to bring around $800 million. For additional detail, visit "Suncor Auctioning Petro-Canada Lubricants" in the June 20, 2016 issue of the OEM/Lube News.
Ironically, Suncor, Canada's biggest energy company, bought Petro-Canada in 2009 in an all-stock transaction valued at roughly $15 billion.
The potential deal would give Calgary, Alberta-based Suncor a cash boost with which to pay down debt incurred as a result of recent acquisitions. These include recent buys such as Canadian Oil Sands, and enough of a stake in the Syncrude joint-venture with Murphy Oil to give it a majority share. Although these purchases were relative bargains, they have added to Suncor's indebtedness; at the end of its most recently reported quarter, long-term debt stood at over C$14.8 billion (US$11.2 billion).
The acquisition of Petro-Canada would bring some diversity into HollyFrontier's portfolio. The company will almost certainly have to tap debt financing in order to pay for the new asset -- reportedly, it held only $533 million in cash and equivalents at the close of its second quarter.
Petro-Canada owns a lube base oil pant in Mississauga, Ontario, near Toronto, with capacity to produce 11,600 barrels per day of its Purity, API Group II/II+ and 4,000 barrels per day of its Purity VHVI, API Group III lube base oils. Petro-Canada produces more than 350 lubricants. The company is the world's largest manufacturer of white mineral oil with its line of PURETOL white mineral oils.
Headquartered in Dallas, TX, HollyFrontier, with a market capitalization of close to $4.2 billion, operates five refineries with 443,000 barrels per day of total throughput capacity. It markets its refined products principally in the Southwest, the Rocky Mountains extending into the Pacific Northwest and in other neighboring Plains states. HollyFrontier owns a lube base oil plant in Tulsa, Oklahoma with capacity to produce up to 9,500 bpd of API Group I base oils.
