Deal will create the largest U.S. refiner
Marathon Petroleum Corp. (ticker: MPC) and Andeavor (ticker: ANDV) have entered into a definitive merger agreement under which MPC will acquire all of ANDV’s outstanding shares, representing a total equity value of $23.3 billion and total enterprise value of $35.6 billion, based on MPC’s April 27, 2018, closing price of $81.43.
ANDV shareholders will have the option to choose 1.87 shares of MPC stock, or $152.27 in cash subject to a proration mechanism that will result in 15% of ANDV’s fully diluted shares receiving cash consideration. The stock portion of the consideration received by Andeavor’s shareholders is expected to be tax-free. This represents a premium of 24.4% to ANDV’s closing price on April 27, 2018. MPC and ANDV shareholders will own approximately 66% and 34% of the combined company, respectively.
The transaction was unanimously approved by the board of directors of both companies and is expected to close in the second half of 2018, subject to approvals from both MPC and ANDV shareholders.
The headquarters will be located in Findlay, Ohio, and the combined business will maintain an office in San Antonio, Texas.
MPC authorizes $5 billion of share repurchases
“Each of our operating segments are strengthened through this transaction, as it geographically diversifies our refining portfolio into attractive markets, increases access to advantaged feedstocks, enhances our midstream footprint in the Permian basin and creates a nationwide retail and marketing portfolio …,” said Gary R. Heminger, MPC chairman and CEO.
Heminger said he expects the combined company to generate approximately $1 billion of tangible annual run-rate synergies within the first three-years. “Given the confidence in the robust cash flow expected to be generated by the combined business, our board also authorized an incremental $5 billion of share repurchases,” Heminger said.
The company said Greg Goff, ANDV chairman and CEO, will join MPC as executive vice chairman. Goff, along with three other Andeavor directors, will also join the board of directors of Marathon Petroleum.
MPC becomes number one U.S. refiner by capacity – 3 MMBPD
According to MPC, the combined company will be the number one U.S. refiner by capacity, and a top-five refiner globally, with throughput capacity of over 3 million barrels per day. Andeavor has refineries in California, the Mid-Continent and the Pacific Northwest – complementing MPC’s existing Gulf Coast and Midwest refining footprint.
MPC’s midstream business will include two MLPs, MPLX LP (ticker: MPLX) and Andeavor Logistics (ticker: ANDX). Upon close of the transaction, MPC will own the general partner and be the largest unitholder in each of the separate MLPs.
