Calumet Specialty Products To Sell Refinery In Wisconsin To Husky Energy For Approximately US$435 Million

Published: Aug 11 2017
Deal Summary

Calumet Specialty Products Partners, L.P., a refiner and processor of specialty hydrocarbon products, entered into definitive agreements to sell refinery located in Superior city, Wisconsin, the US, to Husky Superior Refining Holding Corporation, a subsidiary of Husky Energy Inc., an integrated energy company, for a sale consideration of US$435 million (MM) in cash, plus an additional payment for net working capital, inventories, and reimbursement of certain capital spending.

The refinery produces gasoline, diesel, asphalt and heavy fuel oils with the crude primarily supplied to the refinery through a pipeline and railcars of an Enbridge Inc. The refinery has aggregate crude oil throughput capacity of approximately 50,000 bd. The refined fuels produced are distributed by a Magellan pipeline as well as by tank trucks and railcars. The asset also includes the refinery’s associated logistics, including two asphalt terminals, 3.6 MM barrels of crude and product storage and a fuels and asphalt marketing business.

Tudor, Pickering, Holt & Co. is acting as financial advisor and Kirkland and Ellis LLP is acting as legal advisor to Calumet in the transaction. BMO Capital Markets is acting as financial advisor and Milbank, Tweed, Hadley & McCloy LLP is acting as legal advisor to Husky Energy in the transaction.

The transaction enables Calumet to strengthen its balance sheet and focus on core Specialties portfolio.

The transaction is expected to close in the fourth quarter of 2017, subject to customary closing conditions and receipt of regulatory approvals.

Tim Go, CEO of Calumet, said, “The divestiture of our Superior refinery is in line with Calumet’s strategic vision to become the premier specialty petroleum products company in the world. This transaction provides both financial and strategic benefits for our unitholders, as we further position Calumet to move forward on our stated objectives including strengthening our balance sheet, lowering our leverage, and freeing up capital resources that will allow us to better invest and fund future EBITDA enhancing growth strategies within our core Specialties portfolio. The transaction also reduces our go-forward exposure to commodity pricing and volatility. Equally important, we are excited to find with Husky a great home for our employees at Superior and want to thank them for their contributions to our organization over the last few years. Their dedication and efforts have made Superior an attractive value proposition for Husky, who will retain the Superior employees and will assume the union contract and pension plan. Additionally, Husky has committed to invest in key capital projects at Superior, including the Superior Flexibility Project which will allow the plant to improve its operational efficiency.”

Rob Peabody, CEO of Husky Energy, said, “Acquiring the Superior Refinery will increase Husky’s downstream crude processing capacity, keeping value-added processing in lockstep with our growing production. Upon closing, this new asset will immediately contribute to increased earnings and funds from operations.”

The transaction implies a value of US$8,700 per bbl of refining throughput.

Deal history

Announced: On August 11, 2017, Calumet entered into definitive agreements to sell its refinery located in Superior city, Wisconsin, the US, to Husky Superior Refining for cash consideration of US$435 MM, plus an additional payment for net working capital, inventories, and reimbursement of certain capital spending.

Rumor: On March 16, 2017, Calumet intends to sell its refinery located in Superior city, Wisconsin.

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