Marathon Petroleum Acquires SA’s Andeavor to Form Largest U.S. Refiner

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Ohio based Marathon Petroleum has acquired Andeavor.

Courtesy / Marathon Petroleum Corporation

The Marathon Petroleum campus in Findlay, Ohio, will be the headquarters of a combined company after the acquisition of San Antonio-based Andeavor.

In a merger that will make it the nation’s largest refiner by capacity, Andeavor, the oil refining company founded 50 years ago in San Antonio as Tesoro, announced Sunday that it has been acquired by Ohio-based Marathon Petroleum Corporation.

The transaction valued at $23.3 billion is expected to close during the second half of this year, subject to regulatory conditions and shareholder approval, according to a statement released Sunday.  The combined company, valued at an estimated $90 billion, will be headquartered in Findlay, Ohio.

The merger makes the combined company the No. 1 U.S. refiner by capacity and a top-five refiner globally, with throughput capacity of over 3 million barrels per day.

A Fortune 100 company, Tesoro was founded in 1968 as a petroleum exploration company headquartered in San Antonio. Last summer, the independent refiner and its logistics company, Tesoro Logistics, announced a name change to Andeavor and Andeavor Logistics LP.

At the time, Chairman, President, and CEO Greg Goff said the name change was made to acknowledge “significant progress we’ve made in becoming a premier refining, marketing, and logistics company, and signals our aspiration to continue creating greater value for our stakeholders.”

Goff will join Marathon Petroleum as executive vice chairman and join the board of directors at Marathon along with three other Andeavor directors not named in the merger announcement.

Andeavor employs 1,500 people in San Antonio and more than 14,000 worldwide. A spokeswoman for Andeavor would not say whether the acquisition would result in any layoffs but stated that Marathon Petroleum is determining the best approach to running combined operations.

“We plan to maintain a presence in San Antonio,” spokeswoman Destin Singleton said.

“This transaction combines two strong, complementary companies to create a leading U.S. refining, marketing, and midstream company, building a platform that is well-positioned for long-term growth and shareholder value creation,” stated Gary R. Heminger, Marathon Petroleum chairman and CEO.

“Each of our operating segments are strengthened through this transaction, as it geographically diversifies our refining portfolio into attractive markets, increases access to advantaged feedstocks, enhances our midstream footprint in the Permian Basin, and creates a nationwide retail and marketing portfolio that will substantially improve efficiencies and enhance our ability to serve customers.”

Founded in 1887 as Ohio Oil Company, Marathon Petroleum became a corporate spinoff of Houston-based Marathon Oil Corporation in 2011. Marathon Petroleum has approximately 43,800 employees and ranks in the top 55 of the Fortune 500. It currently operates six refineries with 1.8 million barrels per day total refining capacity, or 10 percent of the nation’s total refining capacity.

The statement released Sunday says that Andeavor shareholders will have the option to choose 1.87 shares of Marathon Petroleum stock, or $152.27 per share in cash. This represents a premium of 24.4 percent over Andeavor’s closing price on April 27.

Marathon and Andeavor shareholders will own approximately 66 percent and 34 percent of the combined company, respectively.

“Given the confidence in the robust cash flow expected to be generated by the combined business, our board also authorized an incremental $5 billion of share repurchases,” Heminger stated. “As a combined company, we will continue our balanced approach to investing in the business and returning cash to our investors, while maintaining our commitment to an investment-grade credit profile.”

With Andeavor’s headquarters leaving town, San Antonio’s energy-sector presence will be most prominently defined by Valero Energy Corporation and its spinoff terminal and pipeline operator, NuStar Energy.

A $50 billion company founded in 1980, Valero manufactures and markets transportation fuels and other petrochemical products, and employs 10,000 people worldwide. Its assets include 15 petroleum refineries with a capacity of approximately 3.1 million barrels per day as well as 11 ethanol plants with a combined production capacity of approximately 1.45 billion gallons per year.

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