Marathon Petroleum Subsidiary to Buy Hess For $2.874 Billion

Marathon Petroleum Corporation (NYSE:MPC) announced that its subsidiary, Speedway LLC, has signed an agreement with Hess Corporation (NYSE:HES) to acquire Hess Retail Holdings LLC. The deal would include all of Hess’ transport operations, retail locations and shipper history on various pipelines, as well as approximately 40,000 barrels per day on Colonial Pipeline. The total consideration amounts to $2.874 billion and is comprised of a cash purchase price of $2.37 billion, an estimated $230 million of working capital and $274 million of capital leases. Marathon and Speedway expect the acquisition to be funded through a combination of debt and available cash and is anticipated to close near the end of the third quarter of 2014, subject to customary closing conditions and regulatory approvals.

As quoted in the press release:

Hess is the largest operator of convenience stores along the East Coast and the fifth largest in the U.S. by number of company-operated sites with 1,256 stores located in 16 states. Speedway is the nation’s fourth-largest convenience store chain by number of company-owned and -operated sites with approximately 1,480 stores located in nine states. The addition of Hess’ stores to the Speedway network of sites will broaden Speedway’s geographic footprint and position Speedway as the premier convenience store operator in the eastern U.S. The combined business will have 2013 pro forma revenues of more than $27 billion, 6.2 billion gallons of annual fuel sales, and $4.8 billion of annual merchandise sales at more than 2,700 retail locations.

Marathon CEO, Gary R. Heminger, said:

This acquisition will be transformative for MPC and Speedway as it will significantly expand our retail presence from nine to 23 states through these premier Hess locations throughout the East Coast and Southeast. Our strategy is focused on growing higher-valued, stable cash flow businesses, and this transaction fully supports that objective. With this significant geographic expansion, we will be able to further leverage our integrated refining and transportation logistics operations, providing an outlet for an incremental 200,000 bpd of assured sales from our refining system.

Click here to read the Marathon Petroleum Corporation (NYSE:MPC) press release