The company’s board is confident of capturing value for the benefit of shareholders
The board of directors of Marathon Petroleum Corp. (MPC) has decided to maintain Speedway as a fully integrated business within MPC which will provide the best opportunity to enhance long-term shareholder value.
Gary R. Heminger, MPC chairman and CEO said, "Our board has a well-established track record of taking bold and transformative actions to drive value and will continue to do so when it's in the best interests of shareholders. Following a rigorous review led by an independent committee of the board, the board has unanimously concluded that shareholder value is best optimized with Speedway remaining part of our integrated business."
MPC stock has outperformed its peer group by 6 percent, since the company announced its strategic actions. The board and management team remained committed to further capturing value for the benefit of shareholders, since they believe there is still significant upside to the company's valuation.
More than a month after an investor group called for the company to take a closer look at its retail network, MPC launched a strategic review of its Speedway c-store chain. Elliot Management Corp. said that MPC is "severely undervalued and that there are readily available steps by which the board can unlock $14 billion–$19 billion in value for shareholders. "Over the past year, MPC has taken significant steps to create value for shareholders," said John Pike, senior portfolio manager at Elliott Management. "We are encouraged by management's efforts to date, applaud the intent to repurchase an additional $1 billion in shares by the end of the year, and look forward to the completion of the further midstream transactions in the first quarter of 2018.”
Major reasons for MPC board to decide on maintaining Speedway as an integrated business within MPC involve the following: As a result of a spin-off or separation, there would be a loss in significant integration synergies, MPC estimates the synergy loss at between approximately $270 million and $390 million annually following an initial supply agreement, any supply agreement structured in pursuit of a tax-free separation would be market-based, the lost synergies would provide only a temporary offset by the supply agreement which would be limited in term and volume.
Speedway has proved to be one of the best-in-class convenience store retailer with its value appearing to be well understood by the market. Relative to the disadvantages, the potential advantages of separation are not compelling and Speedway remaining a part of MPC does not present a structural impediment to its long-term growth prospects. Source: CSN PWKD07092017
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