Marathon Petroleum CEO: Speedway Sale Is a 'Win-Win' for Both Sides
FINDLAY, Ohio — With an agreement on the table to sell Speedway LLC to 7-Eleven Inc., Marathon Petroleum Corp. (MPC) is looking toward the future.
On Aug. 2, MPC announced it is selling the 3,900-store Speedway chain to 7-Eleven for $21 billion. The transaction comes with a 15-year fuel supply agreement for approximately 7.7 billion gallons per year associated with the Enon, Ohio-based Speedway business, as Convenience Store News previously reported.
This deal demonstrates MPC's commitment to executing the strategic priorities it outlined earlier this year, noted President and CEO Michael Hennigan.
"The sale of this business provides certainty around value realization for MPC shareholders," he said during the company's second-quarter 2020 earnings call on Aug. 3. "I believe this is a return of capital business, and a substantial estimated after-tax proceeds of approximately $16.5 billion enables us to both strengthen our balance sheet and return capital to our shareholders."
The sale also creates a long-term relationship between MPC and 7-Eleven "that enhances commercial performance potential through attractive fuel supply agreements and future growth opportunities," according to Hennigan.
"We looked at a lot of different structures and a lot of different options, and came to the conclusion that this deal creates the most value and the most certainty for our shareholders," he said. "Speedway is a leader in the company-owned, company-operated business. 7-Eleven, which currently has a larger franchisee model and a smaller company-op footprint, will now be able to look at the Speedway employees and benefit from Speedway's expertise in the company-owned model, and the combined entity will be that much stronger going forward. That is important to recognize as part of this deal."
For its part, MPC foresees using the proceeds in two primary ways: to defend its investment grade profile, and to return capital to its shareholders.
The company expects to benefit from the integration driven by the fuel supply agreement. Benefits will come from providing both logistics and transportation services.
"We're going to continue to provide those services for 7-Eleven, so there will be a benefit to us as far as using our logistics assets, using our trucking services, trying to give them the utmost in terrific service," the chief executive explained. "It's a win-win for both of us. We're going to capture the integrated value as far as the logistics and the supply, and 7-Eleven will capture the margin and the retail business going forward."
In addition, MPC plans to work "hand-in-hand" with 7-Eleven as the convenience store retailer further grows its portfolio. 7-Eleven has a stated goal to reach approximately 20,000 stores, and MPC has a second supply agreement beyond the Speedway stores.
Brian K. Partee, MPC's senior vice president of marketing, acknowledged that it is difficult to develop a long-term supply arrangement, but described the new partnership with 7-Eleven as "a solid relationship."
"If you think about the history of the Speedway portfolio literally growing up over decades in and around the infrastructure, it was important to us to preserve the integration value operationally associated with that, which we have done so in the contract," Partee said.
Also, historically speaking, MPC and 7-Eleven have not had "a huge" fuel supply relationship to date, so there is a lot of open runway going forward.
"We think there is opportunity there, especially across the broader platform we now have coast to coast, to work closely together and find more opportunities," he said. "We think we started down the right path and have the commercial construct to get there, and we're excited about the prospects going forward, once we get to the closing table, to drive incremental value — not only for MPC, but across both sides of the table."
Findlay-based MPC is an integrated downstream energy company that operates the nation's largest refining system. Its marketing system includes branded locations across the United States, including Marathon brand retail outlets. MPC also owns the general partner and majority limited partner interest in MPLX LP, a midstream company.
Irving, Texas-based 7-Eleven Inc. operates, franchises and/or licenses more than 71,100 stores in 17 countries, including approximately 11,800 in North America.
July 2011: Marathon Oil Corp. completes the spinoff of its downstream business. Marathon Oil Corp. (MRO) continues on as a global upstream company, while Marathon Petroleum Corp. (MPC) becomes the fifth-largest U.S. refiner with a top-tier downstream portfolio of holdings primarily located in the Midwest, Gulf Coast and Southeast regions of the United States.
June 2012: MPC forms MPLX LP, a midstream master limited partnership.
October 2014: The company acquires Hess' retail operations and related assets, including 1,256 stores in 16 states.
September 2017: MPC rejects calls by an investor group to divest Speedway LLC.
October 2018: MPC forms a strategic tie-up with Andeavor, formerly Tesoro Corp., forming a national retail powerhouse of nearly 4,000 locations coast to coast.
October 2019: MPC decides to spin off Speedway into an independent company, with the move slated to be completed by year-end 2020.
June 2020: Due to the global COVID-19 pandemic, MPC pushes back the Speedway spinoff timeline to early 2021.
August 2020: MPC agrees to sell its Speedway retail division to 7-Eleven Inc. for $21 billion. The deal is expected to close in the first quarter of 2021.