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UPDATE 4-Marathon creates top U.S. refiner with $23 bln Andeavor deal

Published 2018-04-30, 07:28 a/m
© Reuters.  UPDATE 4-Marathon creates top U.S. refiner with $23 bln Andeavor deal
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* Marathon paying $152/share to create biggest independent refiner

* Andeavor assets include pipelines, refineries, gas stations

* Marathon CEO Heminger to head combined firm

* Andeavor shares surge 14.5 pct (Adds CEO quote, details)

By John Benny

April 30 (Reuters) - Marathon Petroleum Corp (NYSE:MPC) MPC.N said on Monday it would buy rival Andeavor ANDV.N for more than $23 billion, forming a company that would leapfrog Valero Energy Corp (NYSE:VLO) VLO.N as the largest independent U.S. refiner by capacity.

Shale oil fields have pushed U.S. crude production to record highs and industry experts argue operations that have capacity to refine light crude like Andeavor will be better positioned to take advantage of the boom.

Andeavor also runs refineries in Alaska, California, Minnesota, New Mexico, North Dakota, Texas, Utah and Washington which should complement Marathon's largely Mid-West and Gulf Coast-based operations.

The cash-and-stock deal values Andeavor, formerly known as Tesoro, at about $152 per share, a premium of about 24 percent to closing prices on Friday, driving shares 14.5 percent higher in initial premarket trading on Monday.

Marathon's board also approved an additional $5 billion share buy back, but its shares were just over 1 percent lower.

Including Andeavor's debt, Marathon is paying $35.6 billion to hold 66 percent of a combined company which will have the ability to process about 3.1 million barrels per day along with a large network of filling stations and oil and natural gas pipelines.

Marathon Chief Executive Gary Heminger, who oversaw a 20 percent rise in net profit in the first quarter, will run the combined company, with a senior role for Andeavor's chief executive, Gregory Goff.

"Each of our operating segments are strengthened through this transaction," Heminger said in a statement.

"It geographically diversifies our refining portfolio into attractive markets......enhances our midstream footprint in the Permian basin, and creates a nationwide retail and marketing portfolio," he added.

The deal is expected to close in the second half of this year.

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