Marathon & MPLX Reach $8B Dropdown Agreement
FINDLAY, Ohio — Marathon Petroleum Corp. (MPC) and MPLX LP have inked an agreement for the dropdown of refining logistics assets and fuels distribution services to MPLX for total consideration of approximately $8.1 billion.
The transaction is expected to close on Feb. 1, and will be immediately accretive to MPLX's distributable cash flow per unit.
These assets and services are projected to generate annual EBITDA of $1 billion. MPC is contributing these assets and services in exchange for $4.1 billion in cash and MPLX equity valued at approximately $4 billion.
"We are very pleased to have reached agreement on the terms for the remaining dropdown to MPLX outlined in our strategic actions," said Gary R. Heminger, chairman and CEO of both MPC and MPLX. "The addition of these high-quality, fee-based revenue streams to MPLX further diversifies the partnership's earnings and contributes substantially to the distributable cash flow base of the partnership."
Year-to-date through October, MPC has returned $2.75 billion to its shareholders and plans further return of capital with the after-tax cash proceeds of this dropdown once the transaction closes, in a manner consistent with managing its current investment grade credit profile.
The dropdown agreement was approved by the MPLX board of directors following the approval of the terms of the transaction by its independent conflicts committee.
The conflicts committee was advised by Jefferies LLC for financial matters and Andrews Kurth Kenyon LLP for legal matters.
MPC was advised by Tudor, Pickering, Holt & Co. as to financial matters. The closing of the dropdown transaction is subject to customary conditions, including tax and regulatory review.
"We are very enthusiastic about this drop and the substantial benefits it provides to the partnership. The ability to add these stable earnings streams, particularly the fuels distribution services, which require no maintenance capital, is a unique opportunity to supplement the financial strength of the partnership," said Michael J. Hennigan, president of MPLX.
"It also supports our focus on growing distribution coverage while building a sustainable and attractive growth path for LP distributions well into the future," he added.
MPC also offered to the MPLX board an exchange of its general partner economic interests in MPLX, which include incentive distribution rights (IDRs), for newly issued MPLX common units.
Findlay-based MPC is the nation's third-largest refiner, with a crude oil refining capacity of approximately 1.8 million barrels per calendar day in its seven-refinery system. Marathon brand gasoline is sold through approximately 5,600 independently owned retail outlets across 20 states and Washington, D.C.
In addition, Speedway LLC, an MPC subsidiary, owns and operates approximately 2,730 convenience stores in 21 states.
Through subsidiaries, MPC owns the general partner of MPLX LP, a midstream master limited partnership.