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HollyFrontier: A Buyout Target for Tesoro Corporation?

Independent refiner and marketer of petroleum products Tesoro CorporationTSO is rumored to have renewed its interest in smaller rival HollyFrontier CorporationHFC , per a report by Reuters on Friday.

Shares of Tesoro gained about 1%, while HollyFrontier shares increased over 3%. The HollyFrontier stock also saw a surge in trading volume on the day. 6,414,134 shares exchanged hands compared with the three-month average of 3,326,180. This increase in stock activity is reportedly attributable to the rumor.

In the first quarter of this year, Tesoro and HollyFrontier had entered into negotiations over a takeover deal. However, the deal did not come to a closure as HollyFrontier was not satisfied by the bid offered by Tesoro. The proposed price was also not disclosed.

A successful buyout would give Tesoro access to the high-margin Rocky Mountain region. With low crude prices resulting in high profits for refiners like Tesoro, gaining access to strategic locations would improve its position among peers.

Currently, Tesoro sports a Zacks Rank #1 (Strong Buy) and HollyFrontier holds a Zacks Rank #2 (Buy).

Weak crude prices have spurred a number of merger and acquisition (M&A) activities in the energy space. The $70 billion dollar Shell RDS.A -BG Group merger remains the highlight deal. The recent Energy Transfer Equity ETE -Williams WMB merger agreement has also been in the headlines. Find the top five deals of 2015 here .

With oil prices remaining below the psychologically important $50 per barrel level, energy investors should brace themselves for more M&A activities ahead.

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WILLIAMS COS (WMB): Free Stock Analysis Report

TESORO CORP (TSO): Free Stock Analysis Report

ROYAL DTCH SH-A (RDS.A): Free Stock Analysis Report

ENERGY TRAN EQT (ETE): Free Stock Analysis Report

HOLLYFRONTIER (HFC): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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