Marathon Petroleum Corp (NYSE:MPC) to Buy Andeavor in Biggest Oil Refining Deal


Marathon Petroleum Corp (NYSE:MPC) has announced that it is taking over its main competitor Andeavor in a $23.3 billion deal. If completed, this will be the biggest deal for an oil refinery and will lead to the creation of U.S’s largest independent fuel maker.

The deal, which will be paid in either shares or cash, will place Andeavor around $152.27 per share. The price represents 24% premium of the closing price on Friday.

Shares of Marathon dropped by 8.9% following the announcement with RBC Capital Markets analysts saying that the deal was done at “peak refining bullishness”. On the other hand, Andeavor shares rose by general, shares of Marathon, Andeavor and other refiners have been on a record high since the start of this year.

There has been a growing demand for fuel in Latin America and the U.S. Additionally, there has been a boom which has led to increased accessibility to inexpensive domestic supply, which has given refiners in the U.S a leg up compared to foreign competitors.

Andeavor’s chief executive officer Greg Goff said his company cannot miss this opportunity because it has come at the right moment.

Marathon has its business mainly concentrated in the Gulf Coast and Midwest while Andeavor is mainly focused in western U.S, including pipelines and refineries which it acquired last year when it merged with Western Refining Inc.

The merged company, which will retain the name Marathon, will overtake Valero Energy Corp to become the largest oil refinery in the United States, with a capacity to produce 15% of the country’s total oil production.

While commenting on the deal, director of refining research at Tudor Pickering Holt & Co Matthew Blair said that Andeavor is a big winner in the merger. He added that it will be very important if Marathon will be able to mesh up two big companies. Blair said that given the disparate geographical markets of the two companies, there will be every few challenges in the way to finalizing the deal.

The two companies have indicated that they expect their combined annual cost as well as operating synergies to hit $1 billion in the first three years.

This report is for information purposes only, and is neither a solicitation or recommendation to buy nor an offer to sell securities. Financials Trend is not-a-registered-investment-advisor. Financials Trend is not a broker-dealer. Information, opinions and analysis contained herein are based on sources believed to be reliable, but no representation, expressed or implied, is made as to its accuracy, completeness or correctness. The opinions contained herein reflect our current judgment and are subject to change without notice. Financials Trend accepts no liability for any losses arising from an investor's reliance on the use of this material. Financials Trend sometimes gets compensated up to one hundred and fifty thousand dollars per month for featuring particular stocks. See site disclaimer for complete compensation. Financials Trend and its affiliates or officers currently hold no shares of these stocks. Financials Trend and its affiliates or officers will purchase and sell shares of common stock of these stocks, in the open market at any time without notice. Financials Trend will not update its purchases and sales of these stocks in any future postings on Financials Trend's websites. Certain information included herein is forward-looking within the context of the Private Securities Litigation Reform Act of 1995, including, but not limited to, statements concerning manufacturing, marketing, growth, and expansion. The words "may", "would," "will," "expect," "estimate," "anticipate," "believe," "intend," " project," and similar expressions and variations thereof are intended to identify for ward-looking statements. Such forward- looking information involves important risks and uncertainties that could affect actual results and cause them to differ materially from expectations expressed herein. *Financials Trend does not set price targets on securities. Never invest into a stock discussed on this web site or in this email alert unless you can afford to lose your entire investment.