Marathon Petroleum Studying Its Options For Speedway

Someone sure was busy during the Holidays. On the very first trading day of the new year, Marathon Petroleum Corporation (MPC) announced a number of strategic updates, most of them suggested (and naturally approved) by activist fund Elliott Management. While most of the news was related to its ownership of MPLX (MPLX and worthy of its own post), there was also a nugget related to Speedway, its retail business. For some background, Speedway is the number two convenience store chain (gas stations) in the US and owns and operates ~2,770 convenience stores in 22 states. A special committee of board members will review the company’s strategic options for this business including a spinoff and ‘other strategic and financial alternatives’. Shareholders were happy with the updates and sent MPC’s shares soaring.

The Speedway news is a pretty big about face for the company. Bloomberg’s Gadfly notes that until this announcement (and as recently as October), the company strongly believed the retail business was a key differentiator and value-add to the overall business. Analysts on the strategic update call seemed to take this news as meaning a spinoff is a fait accompli, but despite the excitement from the analyst community, management would only commit to reviewing the results of the study.

In any case, this is quite a win for Elliott, which unveiled a 4% stake in the company late last year. Although Paul Singer’s firm received a lot of publicity for its battle with the Argentinian government, the fund has also had a number of successful campaigns against US companies. One example was its rather public fight with the Hess Corporation back in 2013. One of the outcomes of that battle was the sale of Hess’ retail business (gas stations) to Marathon’s Speedway. At one point Hess’ plan had been to spin off its retail operations into an independent company, but ultimately a sale proved more attractive. Now it seems the stations may be spun off after all, albeit under a different name.

A spinoff really isn’t such a novel idea considering the fact that there have been a number of other retail segment spinoffs in the space. 2013 alone witnessed both Valero’s (VLO) CST spinoff (since acquired) and Murphy Oil’s (MUR) spinoff of Murphy USA (MUSA). In fact, MPC is quite familiar with the transaction as it is itself a 2011 spinoff from Marathon Oil Corporation (MRO). MPC also IPO’d MPLX back in 2012.

The company expects to share the results of its Speedway review sometime in the middle of the year and you can be sure that we will keep you updated on this situation.

Disclosure: Author holds no position in any stock mentioned.