Marathon Petroleum Company LP (“MPC”), a wholly owned subsidiary of Marathon Oil Corporation (MRO), signed a deal to sell Minnesota downstream assets to two private equity firms for approximately $900 million. The letter of intent of the deal was signed in May, 2010.
ACON Investments LLC (“ACON”) and TPG Capital L.P. (“TPG”) will be buying the aforesaid assets. These two firms formed Northern Tier Energy LLC (Northern Tier Energy) to manage the properties. The total deal value includes about $80 million in preferred stock in Northern Tier Energy.
The assets to be divested comprise a refinery and terminals in St. Paul Park, Minnesota (with a capacity of 74,000 barrels per day), 166 SuperAmerica stores (including six in Wisconsin), SuperMom’s LLC, SuperAmerica Franchising LLC, interests in pipeline assets in Minnesota and about $300 million worth of inventories.
Under the terms of the agreement, Marathon has the provision to receive up to an additional $125 million over eight years or pay back up to $60 million over two years as “margin support,” depending on the performance of the assets.
Although the closing of the deal is subject to certain rules and regulatory conditions, Marathon expects to seal the deal by the end of 2010.
For Marathon, this divesture is a part of the company’s strategy to restructure its business operations in an effort to sustain its market leading position. The company aims to boost returns and maintain its competitive edge in this difficult environment by taking aggressive cost reduction initiatives, exiting unprofitable markets and streamlining the organization.
Our long-term Neutral rating on the stock reflects the company’s bundle of development projects, profitable refining business and diversified exploration and production assets across Angola, Gulf of Mexico and Canada, partly offset by a volatile oil and gas scenario, limited visibility around the long-term projects and drilling suspension in the Gulf region.
Marathon currently retains a Zacks #3 Rank (short-term Hold rating).
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