Thursday, March 17, 2016

Marathon Petroleum boats to MPLX after all

I'm sorry I missed this three days ago, but ...

Remember last year when Marathon Petroleum said it would transfer its marine operations to its pipeline limited partnership, then canceled it later in the year? Well, it's gone through, as was announced Monday. It takes effect at the end of this month.

I saw a Marathon boat yesterday. It still had the Marathon logo on the stacks and the Marathon name on the side. If the transaction is final two weeks from today, the change will likely occur then.

The entire news release is below.

FINDLAY, Ohio, March 14, 2016 - Marathon Petroleum Corp. (NYSE: MPC) and MPLX LP (NYSE: MPLX) have executed definitive agreements for the contribution of MPC's inland marine business to MPLX. In exchange, MPLX will issue equity to MPC valued at $600 million. MPLX expects 98 percent of the equity to be issued in the form of common units and the remainder in general partner units, at an approximate price of $26.09 per unit.

The total transaction consideration represents an implied multiple of approximately five times the inland marine business' projected earnings before interest, taxes, depreciation and amortization (EBITDA) for the next 12 months. MPC has agreed to waive first-quarter 2016 distributions, including incentive distribution rights and general partner distributions, with respect to the common units issued in the transaction. Pending customary closing conditions, the transaction is expected to close as of March 31 and will be immediately accretive to unitholders.

The inland marine business, comprised of 18 tow boats and 205 barges, transports light products, heavy oils, crude oil, renewable fuels, chemicals and feedstocks in the Midwest and U.S. Gulf Coast regions, and accounts for nearly 60 percent of the total volumes MPC ships by inland marine vessels.

"The addition of these high-quality, well-maintained marine assets to the partnership under a fee-for-capacity contract with MPC adds approximately $120 million of annual EBITDA, providing a highly predictable income and cash-flow stream that further diversifies the earnings mix for MPLX," said MPLX Chairman and Chief Executive Officer Gary R. Heminger. "The acquisition price reflects MPC's ongoing and strong support of the partnership."

Heminger noted that issuing new equity to MPC in consideration for the assets eliminates the need for MPLX to access the public equity markets to fund the transaction.

The terms of the acquisition were approved by the Conflicts Committee of the board of directors of MPLX's general partner. The committee is comprised entirely of independent directors, and is being advised principally by Evercore Partners as to financial matters, Akin Gump Strauss Hauer & Feld as to legal matters and K&L Gates as to admiralty and maritime law matters.