We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Marathon Petroleum (MPC) Inks $23.3B Deal to Buy Andeavor
Read MoreHide Full Article
Marathon Petroleum Corporation (MPC - Free Report) recently inked a deal worth $23.3 billion to acquire its rival Andeavor , marking the biggest-ever deal by an oil refiner, in a bid to become the top independent refiner in the United States.
When the mega-acquisition deal will culminate, it is likely to give all the leading refiners a run for their money. The combined company is set to create the largest U.S. refiner in terms of refining capacity, surpassing Valero Energy Corporation (VLO - Free Report) that currently holds the position. The new entity will also create a nationwide refining giant in terms of market capitalization, taking over the crown from Phillips 66 (PSX - Free Report) .
Post the announcement of the deal, shares of Marathon Petroleum have declined 8% to close at $74.91 on Apr 30. It further slid almost 2.7% yesterday to close at $72.90. This reflects investors’ disappointment toward the pricey deal, considering that Marathon is paying a hefty premium for Andeavor’s shares. However, many analysts still find the premium reasonable, owing to the synergies associated with the deal and long-term opportunities it could provide.
On the other hand, Andeavor’s share price rose more than 13% to close at $138.32 on Apr 30. However, shares have declined about 3.5% yesterday to stand at $133.48.
Deal Details
Marathon Petroleum has agreed to buy all the outstanding shares of Andeavor’s representing a total equity value of $23.3 billion. The deal also assumes Andeavor’s debt, thus pushing the total value of the transaction to $35.6 billion.
Investors in Andeavor can choose to receive $152.27 per share in cash or 1.87 shares of Marathon Petroleum in exchange of their current shareholdings.
Marathon’s bid represents 24% premium to Andeavor’s closing share price of $122.38 on Apr 27, thus valuing Andeavor at $152.27 a share.
The transaction has been unanimously approved by the board of directors of both the companies. Subject to satisfactory closing conditions, along with shareholders’ consent and other regulatory approvals, the deal is set for closure in the second quarter of 2018.
Post the culmination of the deal, Marathon will own 66% stake in the combined entity, while Andeavor will hold the remaining 34% interest.
Deal Motive
Marathon Petroleum’s operations are focused on the Gulf Coast and Midwest while Andeavor’s refinery activities are mainly concentrated in California, the Mid-Continent and Pacific Northwest. The complementary asset base has been the key driver of the deal.
The buyout will integrate the premier assets of both the companies, bolstering the scale and leadership position of the combined entity in the region. The deal will enable the companies to pool their expertise and share their best practices, thereby enhancing buying power in securing services in the region.
The deal comes at an opportune time as the U.S. refiners are set to benefit from the record U.S. shale output. The combined entity also looks well positioned to capitalize from regulations to lower pollution levels from ships. Andeavor’s port assets in California along with Marathon Petroleum’s facilities in the U.S. Gulf Coast will allow the new entity to sell lower-sulfur ship fuel.
Deal Benefits
The deal expands the geographical footprint of Marathon Petroleum in attractive markets, expanding its foothold in the Permian Basin, thereby creating an enviable retail and marketing portfolio. The combined entity will have a processing capacity of more than 3 million barrels per day (bpd) at 16 refineries spread across the country, selling fuel via 7,800 branded filling stations. The deal makes the company the largest U.S. refiner and the fifth largest in the world by capacity.
Additionally, the strategic acquisition is expected to lead to significant commercial, financial and operational synergies, due to the integration of asset, systems and staff. The agreement is expected to result in operational synergies of around $1 billion within the first three years. The deal is expected to be immediately accretive to Marathon Petroleum’s earnings and cash flows. Based on the forecasted cash-flow generation, this Zacks Rank #3 (Hold) company has also approved share buybacks of $5 billion. You can seethe complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Looking for Stocks with Skyrocketing Upside?
Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.
Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.
Image: Bigstock
Marathon Petroleum (MPC) Inks $23.3B Deal to Buy Andeavor
Marathon Petroleum Corporation (MPC - Free Report) recently inked a deal worth $23.3 billion to acquire its rival Andeavor , marking the biggest-ever deal by an oil refiner, in a bid to become the top independent refiner in the United States.
When the mega-acquisition deal will culminate, it is likely to give all the leading refiners a run for their money. The combined company is set to create the largest U.S. refiner in terms of refining capacity, surpassing Valero Energy Corporation (VLO - Free Report) that currently holds the position. The new entity will also create a nationwide refining giant in terms of market capitalization, taking over the crown from Phillips 66 (PSX - Free Report) .
Post the announcement of the deal, shares of Marathon Petroleum have declined 8% to close at $74.91 on Apr 30. It further slid almost 2.7% yesterday to close at $72.90. This reflects investors’ disappointment toward the pricey deal, considering that Marathon is paying a hefty premium for Andeavor’s shares. However, many analysts still find the premium reasonable, owing to the synergies associated with the deal and long-term opportunities it could provide.
On the other hand, Andeavor’s share price rose more than 13% to close at $138.32 on Apr 30. However, shares have declined about 3.5% yesterday to stand at $133.48.
Deal Details
Marathon Petroleum has agreed to buy all the outstanding shares of Andeavor’s representing a total equity value of $23.3 billion. The deal also assumes Andeavor’s debt, thus pushing the total value of the transaction to $35.6 billion.
Investors in Andeavor can choose to receive $152.27 per share in cash or 1.87 shares of Marathon Petroleum in exchange of their current shareholdings.
Marathon’s bid represents 24% premium to Andeavor’s closing share price of $122.38 on Apr 27, thus valuing Andeavor at $152.27 a share.
The transaction has been unanimously approved by the board of directors of both the companies. Subject to satisfactory closing conditions, along with shareholders’ consent and other regulatory approvals, the deal is set for closure in the second quarter of 2018.
Post the culmination of the deal, Marathon will own 66% stake in the combined entity, while Andeavor will hold the remaining 34% interest.
Deal Motive
Marathon Petroleum’s operations are focused on the Gulf Coast and Midwest while Andeavor’s refinery activities are mainly concentrated in California, the Mid-Continent and Pacific Northwest. The complementary asset base has been the key driver of the deal.
The buyout will integrate the premier assets of both the companies, bolstering the scale and leadership position of the combined entity in the region. The deal will enable the companies to pool their expertise and share their best practices, thereby enhancing buying power in securing services in the region.
The deal comes at an opportune time as the U.S. refiners are set to benefit from the record U.S. shale output. The combined entity also looks well positioned to capitalize from regulations to lower pollution levels from ships. Andeavor’s port assets in California along with Marathon Petroleum’s facilities in the U.S. Gulf Coast will allow the new entity to sell lower-sulfur ship fuel.
Deal Benefits
The deal expands the geographical footprint of Marathon Petroleum in attractive markets, expanding its foothold in the Permian Basin, thereby creating an enviable retail and marketing portfolio. The combined entity will have a processing capacity of more than 3 million barrels per day (bpd) at 16 refineries spread across the country, selling fuel via 7,800 branded filling stations. The deal makes the company the largest U.S. refiner and the fifth largest in the world by capacity.
Additionally, the strategic acquisition is expected to lead to significant commercial, financial and operational synergies, due to the integration of asset, systems and staff. The agreement is expected to result in operational synergies of around $1 billion within the first three years. The deal is expected to be immediately accretive to Marathon Petroleum’s earnings and cash flows. Based on the forecasted cash-flow generation, this Zacks Rank #3 (Hold) company has also approved share buybacks of $5 billion. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Looking for Stocks with Skyrocketing Upside?
Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.
Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.
See the pot trades we're targeting>>