Marathon
acquires Ashland's Interest in Marathon Ashland Petroleum Company
Posted: 19 March 2004
Acquisition complements Marathon's long term growth plans
Marathon Oil Corporation announced today that it has entered into
an agreement with Ashland Inc. (NYSE: ASH) under which it will acquire
Ashland's 38 percent interest in Marathon Ashland Petroleum LLC
(MAP) in a transaction valued at $2.93 billion. Currently, Marathon
owns a 62 percent interest in MAP and, following the completion
of this transaction, which is expected to occur in the fourth quarter
of this year, Marathon will become the sole owner of this top quartile
U.S. refining, marketing and transportation company.
As part of the transaction, Marathon will acquire certain other
complementary Ashland businesses for additional consideration of
approximately $94 million. The closing of the transaction is contingent
upon a number of conditions, including a favorable tax ruling from
the U.S. Internal Revenue Service as to the tax-free nature of the
transaction, Ashland shareholder approval, Ashland public debt holder
consents and the expiration or termination of any applicable waiting
period under the Hart-Scott-Rodino Act.
"Marathon's acquisition of this minority interest in MAP is
highly complementary to our long term growth strategy," said
Clarence P. Cazalot, Jr., Marathon president and CEO. "One
of Marathon's strategic intents is to remain a fully integrated
company creating sustainable value growth. Acquiring full ownership
of MAP provides us with substantial growth opportunities and leverages
our access to the profitable Midwest growth markets. At the same
time, Marathon will retain the financial and operational flexibility
to continue investing in new and existing core exploration and production
operations, as well as our emerging integrated gas business."
In addition to acquiring Ashland's minority interest in MAP, Marathon
will acquire Ashland's maleic anhydride business, including the
company's plant located in Neal, West Virginia, adjacent to MAP's
Catlettsburg (Kentucky) refinery, as well as a portion of its Valvoline
Instant Oil Change business, consisting of 61 retail outlets located
in Michigan and Ohio. While not part of MAP, these additional assets
are complementary to MAP's business.
Under the terms of the agreement, Marathon will acquire Ashland's
interest in MAP and other businesses for consideration payable as
follows: $315 million in Marathon common stock to be distributed
to Ashland's shareholders, approximately $794 million in cash and
accounts receivable to be distributed to Ashland by MAP, approximately
$1.9 billion in assumed debt, and assumed environmental liabilities
with a present value of $15 million.
Marathon intends to initiate an offering for approximately $1 billion
in new Marathon common shares as soon as practical. Proceeds generated
by this equity offering, along with existing Marathon cash resources,
are expected to be used to retire debt after the closing of the
transaction.
Following the completion of the transaction and the planned equity
offering, Marathon estimates its cash adjusted debt-to-capital ratio
will be well within the company's stated target of approximately
40 percent, allowing Marathon to retain the financial flexibility
to support the company's global growth plans, as well as preserve
Marathon's overall credit quality.
Marathon expects the combined effect of the equity offering and
the acquisition to be dilutive on an earnings per share basis in
2004, as a result of the difference in the timing of the equity
offering and the completion of the acquisition. However, the company
anticipates the acquisition would be accretive to earnings per share
and cash flow beginning in 2005.
"The success of the MAP joint venture since its formation
in 1998 is due, in large part, to the outstanding partnership spirit
that continues to exist between Marathon and Ashland," added
Cazalot. "This relationship has been, and continues to be,
based upon a shared vision to maintain MAP's top quartile performance.
We want to thank Ashland for being such a strong partner and we
look forward to working cooperatively with them as we move toward
closing this transaction. Ashland is, and will continue to be, one
of MAP's largest customers, and we also look forward to a continuing,
mutually beneficial business relationship."
MAP is the largest refiner in the Midwest and fifth largest U.S.
refiner with seven refineries with a total capacity of 948,000 barrels
of crude oil per day. The company has more than 8,000 miles of pipeline
that it owns, operates or leases and markets through a network of
nearly 6,000 retail outlets under the Marathon, Speedway, Super
America and Pilot Travel Center brands.
Marathon will conduct a conference call and Web cast with security
analysts today, Friday, March 19, at 11:30 a.m. EST to discuss this
acquisition. To listen to the Web cast of the conference call, visit
Marathon's website at www.Marathon.com . Replays of the Web cast
will be available through April 2, 2004.
For more information see http://www.marathon.com
Posted by Richard Price,
Editor Pipeline Magazine
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