Marathon Petroleum Corp. will sell about $8.1 billion worth of refining and logistics assets and fuel distribution services to MPLX, its energy and logistics subsidiary, the companies reported.
The deal is expected to close Feb. 1.

The assets and services are projected to generate annual earnings before interest, taxes, depreciation and amortization (EBITDA) of $1 billion, the companies said.

In return for the assets, Marathon Petroleum will receive $4.1 billion in cash and MPLX equity valued at about $4 billion. The equity will consist of 111.6 million MPLX common (limited partner) units and 2.3 million general partner units to maintain Marathon’s 2 percent general partner interest in MPLX.

“We are very pleased to have reached agreement on the terms for the remaining dropdown to MPLX outlined in our strategic actions,” said Gary Heminger, chairman and chief executive officer of both Marathon Petroleum and MPLX. “The addition of these high-quality, fee-based revenue streams to MPLX further diversifies the partnership’s earnings and contributes substantially to the distributable cash flow base of the partnership.”

Michael Hennigan, president of MPLX, said the exchange will provide “substantial benefits” to MPLX.

The ability to add these stable earning streams, particularly the fuel distribution services, which require no maintenance capital, is a unique opportunity to supplement the financial strength of MPLX, he said.

“It also supports our focus on growing distribution (of cash to unit holders),” he said.

Marathon Petroleum Corp. also offered to the MPLX board an exchange of its general partner economic interest in MPLX, which includes incentive distribution rights, for newly-issued MPLX common units. The transaction is expected to provide a clear valuation for Marathon’s general partner interests in MPLX, and reduce MPLX’s cost of capital to support the sustainable long-term growth of the partnership, the companies reported.

Marathon Petroleum will continue to own the non-economic general partner interest in MPLX.

The transaction is being reviewed by the conflicts committee of the MPLX board. Subject to approval of the MPLX board, the exchange is expected to close Feb. 1, in conjunction with the closing of the sale of $8.1 billion in assets.

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