Marathon Petroleum Corporation (MPC) has announced a definitive agreement to merge two midstream units in a deal with an equity value of $9bn.
The deal will see the acquisition of Andeavor Logistics (ANDX) by MPLX in a unit-for-unit transaction at a blended exchange ratio of 1.07x. The enterprise value for the acquired entity is $14bn.
ANDX is a fee-based, full-service, diversified midstream logistics company sponsored by Marathon, which also formed a diversified, large-cap master limited partnership (MLP) known as MPLX.
The merger will result in the creation of a large-scale, diversified midstream company, which will be driven by fee-based cash flows.
The combined entity will have an expanded geographic footprint and enhanced long-term growth opportunities, Marathon noted.
According to the agreement, ANDX unitholders will receive 1.135 x MPLX common units for each common unit held in the company, while MPC will get 1.0328 x MPLX common units for each ANDX common unit held.
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By GlobalDataMarathon chairman and CEO Gary Heminger said: “This transaction simplifies our MLPs into a single listed entity and creates a leading, large-scale, diversified midstream company anchored by fee-based cash flows.
“This transaction is projected to be immediately accretive to MPLX unitholders on distributable cash flow, demonstrating MPC’s commitment to positioning its midstream business for long-term success.
“The combined entity will have an expanded geographic footprint, which we believe enhances our long-term growth opportunities and the sustainable cash flow profile of the business.”
Following the completion of the transaction, MPLX’s Mike Hennigan will continue to serve as president of the combined entity.
The transaction will enhance Marathon’s presence in the Permian basin, the premier shale play in the US.
The broader footprint will also enable the company to selectively deploy capital towards projects that yield the highest return.
Marathon operates a refining system with a combined crude oil capacity of more than three million barrels a day.
MPLX owns and operates midstream energy infrastructure and logistics assets, as well as provides fuels distribution services.
Anticipated to occur in the second half of this year, the closure of the merger is subject to customary closing conditions and regulatory approvals.
Last October, Marathon Petroleum bought integrated marketing, logistics and refining company Andeavor for $23.3bn. The deal enabled Marathon to become the nation’s leading refiner.
