Marathon-Andeavor merger creates biggest US refiner with a high stake in Mexico
Marathon Petroleum Corp. (MPC) and Andeavor (ANDV) announced that they have entered into a definitive merger agreement under which the first will acquire all of latter’s outstanding shares, representing a total equity value of US$ 23.3 billion and total enterprise value of US$ 35.6 billion, based on MPC’s April 27, 2018, closing price of US$ 81.43. From this merger will result the largest U.S. refiner with high chances to “dominate Mexico’s freshly liberated gasoline and diesel markets from all sides,” Bloomberg reported.
The combined company will be the No. 1 U.S. refiner by capacity and a top-five refiner globally, with throughput capacity of over 3 million barrels per day. The combination also enhances crude oil integration from wellhead to refinery supply across the integrated system.
ANDV shareholders will have the option to choose 1.87 shares of MPC stock, or US$ 152.27 in cash subject to a proration mechanism that will result in 15% of ANDV’s fully diluted shares receiving cash consideration. 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.
“This transaction combines two strong, complementary companies to create a leading U.S. refining, marketing, and midstream company, building a platform that is well-positioned for long-term growth and shareholder value creation,” said in a statement Gary R. Heminger, MPC chairman and chief executive officer.
The headquarters will be located in Findlay, Ohio, and the combined business will maintain an office in San Antonio, Texas.
According to Bloomberg, the merger will facilitate Andeavor’s plans to expand in Northern Mexico, where the company has acquired rights to manage fuel-storage assets owned by Petroleos Mexicanos but does not own refining capacity on the U.S. Gulf Coast to supply fuel into Mexico’s East Coast. By using Marathon’s refining capacity, gasoline and diesel could be shipped by tankers or railcars.
“After Marathon’s US$ 23.3 billion merger with Andeavor, it will become one of the biggest suppliers of fuel to Mexico, which struggles to produce a third of the fuels it could at nameplate capacity,” says the report.