Marathon Petroleum bows to activist investors
Gas stations being spun off, CEO leaving
Bowing to activist investors, Ohio refining company Marathon Petroleum is making changes to its top leadership team and is seeking to spin off nearly 4,000 Speedway gas stations into a separate and publicly traded company — which experts say is poised to become the second largest chain of convenience stores in the United States.
Marathon, the nation’s second largest refining company, announced the changes in three separate statements that followed the release of its third quarter results Thursday. The company reported a $1.1 billion profit on $31.2 billion of revenue during the third quarter, a notable increase over the $942 million profit on $23.1 billion of revenue during the same time period last year.
Longtime CEO Gary Heminger, who has come under recent pressure from investors, said Thursday that he would retire after Marathon’s 2020 shareholders meeting — following nearly 45 years with the company.
A search committee has been launched to find his successor.
A second announcement from the company said that Greg Goff, the former CEO of Andeavor, which Marathon acquired about a year ago, will retire at the end of the year.
Goff leads Marathon’s pipeline and storage terminal arm MPLX LP. MPLX President Michael Hennigan has been named successor.
In the third announcement, Marathon said it plans to spin off its Speedway gas stations as separate and publicly traded company. With more than 3,900 gas stations across the eastern United States, the refining company’s Speedway retail operations are expected to realize $1.5 billion before taxes.
Marathon, headquartered in Findlay, Ohio, owns refineries in Texas City and El Paso, which combined employ 2,230 people and process up to 716,000 barrels of crude oil per day to make gasoline, diesel and other products.
Originally focused on the East Coast, Marathon bought San Antonio-based and West Coast-focused refining company Andeavor in a $23.3 billion deal that closed in October 2018.
The changes at Marathon come five weeks after activist investor Elliott Management went public with demands for a radical overhaul of the company.
Elliott argued that breaking up the company into separate refining, pipeline and retail companies would make more money for investors. The investment firm also urged that Marathon find a successor to Heminger.
In a statement released Thursday, Elliott said the actions taken by Marathon would “unlock substantial value for shareholders.”
“We commend Gary and the board for taking action to allow these businesses to realize their full potential,” Elliott said in its statement.
If the spin-off deal is successful, Speedway is poised to become the second largest independent gas station chain in the United States, said Patrick DeHaan, head of petroleum analysis for the gas station research firm GasBuddy.
With an estimated 3,929 stores in operation, DeHaan said an independent Speedway would rank only behind Quebec-based Alimentation Couche-Tard, which company figures show has more than 7,700 Circle K stores across the United States.
Over the past decade, Marathon has invested heavily in its Speedway gas stations, which DeHaan said have paired aggressive gasoline prices with modern, remodeled stores that feature a wider selection of higher-end products.
“Their Speedy Cafe is basically a ‘cafe’ gas station, so top to bottom they’ve created well-lit, wellstocked desirable convenience stores at hundreds of stations,” DeHaan said. “They’ve spent three arms and two legs on renovations in recent years.”
And with all Speedway gas stations supplied by refineries owned by Marathon, DeHaan believes that any potential buyer of the chain likely would strike a deal with Marathon to keep them supplied with gasoline and diesel through an already proven distribution network.
“Speedway has done extensive work on improving itself,” DeHaan said. “Margins are good, and they probably have the best loyalty program in the space.”