Leading integrated energy company Marathon Oil Corporation (MRO) announced that its ancillary Marathon Petroleum Company LP has completed the sale of most of the company’s Minnesota downstream assets. The deal was signed in October 2010, with two private equity firms, ACON Investments LLC (“ACON”) and TPG Capital L.P. (“TPG”).
ACON Investments and TPG Capital formed a stand-alone company Northern Tier Energy LLC to manage the acquired assets.
Marathon received a total consideration of approximately $935 million from the divesture, which includes about $80 million in preferred stock of Northern Tier Energy.
As per the earnout terms of the deal, Marathon will receive up to an additional $125 million over eight years or pay back up to $60 million as margin support to the buyers depending on the performance of the assets.
The assets disposed comprise the St. Paul Park refinery (production capacity of 74,000 barrel per day) and its associated terminals as well as 166 SuperAmerica convenience stores, which include six stores in Wisconsin. The SuperMom’s bakery and commissary, SuperAmerica Franchising LLC, interests in pipeline assets in Minnesota and associated inventories were also included in the deal.
This disposition forms a part of Marathon’s restructuring program intended to redesign its asset base, slim down its costs and exit the low profit generating markets.
Houston, Texas-based Marathon enjoys the benefits of an array of development projects along with diversified exploration and production assets spreading over Angola, Gulf of Mexico and Canada.
However, we remain apprehensive about the unfavorable macro environment and competitionfrom larger peers such as Chevron Corporation (CVX) and ExxonMobil (XOM). We are maintaining our long-term Neutral recommendation on the stock.
Marathon currently retains a Zacks #3 Rank (short-term Hold rating).
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