Marathon Petroleum's MPLX To Buy MarkWest Energy Partners In $20 Bln Deal

(RTTNews) - Oil refiner Marathon Petroleum Corp. (MPC) said Monday that its pipeline operator MPLX LP (MPLX) has agreed to acquire MarkWest Energy Partners L.P. (MWE) for an enterprise value of about $20 billion. This includes the assumption of debt of about $4.2 billion.

The combination of the two companies, both structured as master limited partnerships, will create the fourth-largest master limited partnership or MLP with a market capitalization of $21 billion.

MarkWest is the second-largest processor of natural gas in the U.S., and the largest processor and fractionator in the Marcellus and Utica shale regions.

Under the terms of the deal, the common unitholders of MarkWest would receive 1.09 common units of MPLX and a one-time cash payment of about $3.37 per common unit, for a total consideration of $78.64 per unit. The offer price represents a 32 percent premium to MarkWest's closing stock price of $59.75 on Friday.

Marathon Petroleum said it will contribute $675 million of cash to MPLX to fund the one-time cash payment to MarkWest unitholders.

The terms of the merger deal was unanimously approved the boards of directors of the general partners of MPLX and MarkWest. Following the completion of the transaction, MarkWest will become a wholly owned subsidiary of MPLX.

Upon completion of the transaction, Marathon Petroleum will continue as general partner of MPLX and own a 19 percent stake in MPLX.

Gary Heminger, President and CEO of Marathon Petroleum said, "This combination is a significant step in executing MPC's strategy to grow its higher-valued, stable cash flow midstream business, by transforming MPLX into a large-cap, diversified master limited partnership."

Further, Heminger noted that the combination of MarkWest and MPLX eliminates the need for the recently proposed MPLX acquisition of Marathon Petroleum's marine transportation assets in 2015. As a result, that transaction has been indefinitely deferred.

The transaction between MPLX and MarkWest, subject to approval by MarkWest unitholders, is expected to close in the fourth quarter of 2015.

Findlay, Ohio-based MPLX affirmed its anticipated distribution growth of 29 percent for the current year and expects a compound annual distribution growth rate of 25 percent for the combined entity through 2017.

The MarkWest executive team would become executive officers of MPLX in roles similar to their current responsibilities at MarkWest. They will report to Heminger and remain in Denver, Colorado, where MPLX is committed to maintaining a significant presence.

Frank Semple, MarkWest's chairman, president and CEO, will become Executive Vice Chairman of MPLX. In addition, two existing directors of MarkWest, including Semple, will be appointed to the board of directors of the general partner of MPLX. Semple will also be appointed to the board of directors of Marathon Petroleum.

MPC is trading at $59.42, up $4.92 or 9.04 percent on a volume of 7.42 million shares. MPLX is trading at $57.69, down $11.36 or 16.45 on a volume of 1.29 million shares.

MWE is trading at $65.36, up $5.61 or 9.39 percent on a volume of 5.37 million shares.