Source: Houston Chronicle
Source: Houston Chronicle
Elliott Management Corp. renewed its push for Marathon Petroleum Corp. to split into three separate businesses, a move the hedge fund said would unlock more than $22 billion in value.
Marathon should divide into separate retail, midstream and refining companies, the hedge fund founded by billionaire Paul Singer said Wednesday in a statement. Elliott said it owns about 2.5% of Marathon. Shares of the second-biggest U.S. refiner by market value jumped as much as 7%, the most since Dec. 26.
Marathon has struggled to win investors’ confidence after buying rival Andeavor last year for $22 billion. Though the company earlier this year agreed to merge its Andeavor and MPLX LP pipeline units, Elliott says the corporate structure remains overly complex. The refiner has been one of the poorest-performing U.S. fuel makers, lagging peers like Phillips 66 and Valero Energy Corp.
Carving Marathon into three businesses would create a path to address “the company’s chronic underperformance, to improve its businesses and to unlock significant and sustainable value for its shareholders,” Elliott said. A spokesman for Marathon had no immediate comment when reached by phone Wednesday.
It’s not the first time Elliott has pushed for changes at Marathon. In 2016, it made a similar demand for the company to split its three main businesses. The Findlay, Ohio-based refiner took steps to simplify its pipeline partnership a year later at the hedge fund’s urging, but rejected a proposal to spin off its retail arm, Speedway.
Under Elliott’s plan, Marathon would split into three: the Speedway convenience stores, MPLX pipeline assets and the refining business.
Marathon Petroleum was spun off from Marathon Oil Corp. in 2011 and it has faced several activist battles since. Elliott’s 2016 push came after Marathon was able to assuage complaints from Jana Partners by transferring some assets into a master-limited partnership.
Marathon shares have slid more than 35% in the past year as the energy sector struggles to attract investor capital amid volatile crude prices. Chief Executive Officer Gary Heminger told investors last month that it was continuing to focus on portfolio optimization, “which could include asset divestitures to strategically streamline our integrated asset base.”
While peers such as Phillips 66 and Valero have churned out total returns of 22% and 20%, respectively, over the past two years, Marathon has delivered a gain of less than 15% to shareholders. Only PBF Energy Inc. lagged that result with a 9% return. These figures are based on share price performance plus reinvestment of dividends.
