Marathon Petroleum to Buy Andeavor for $20 Billion, WSJ Says

(Bloomberg) -- Marathon Petroleum Corp. plans to buy rival oil refiner Andeavor for more than $20 billion, The Wall Street Journal reported, in a deal that could create the largest fuel maker in the U.S.

The stock and cash offer values Andeavor at about $150 a share, the Journal said, citing an unidentified source. That’s about a 23 percent premium over Friday’s closing price. The purchase is expected to be announced Monday, according to the report. The two companies didn’t immediately respond to requests for comment sent outside U.S. business hours Sunday.

Findlay, Ohio-based Marathon Petroleum is the third-largest independent U.S. refiner by market capitalization, valued at about $38.6 billion, according to data compiled by Bloomberg. San Antonio, Texas-based Andeavor, formerly known as Tesoro Corp., is the fourth-largest, worth $18.7 billion. Phillips 66 is the largest U.S. independent refiner, valued at $51.9 billion.

The combined company would also overtake Valero Energy Corp. to become the biggest in terms of U.S.-based oil refining capacity. At almost 2.93 million barrels a day, that’s about 16 percent of the nation’s total, according to Bloomberg calculations using Energy Information Administration data as of Jan. 1, 2017.

Marathon’s geographic footprint is focused in the U.S. Midwest and Gulf Coast, while Andeavor’s refineries and pipelines are located in the western U.S. The different locales may make regulatory approval easier to win, the Journal reported.

Marathon Chief Executive Officer Gary Heminger is expected to run the combined company, with a senior role for his counterpart at Andeavor, Gregory Goff. The deal is expected to produce $1 billion of synergies, the Journal reported.

U.S. refiners count themselves among the biggest beneficiaries of the shale boom, as the rapid growth in oil production has given them access to abundant supplies at a discount to global prices. The Standard & Poor’s 500 Index of oil refiners reached an all-time high last week.

Independent oil refiners in the U.S. at the end of last year reaped fatter profits from the nation’s recent tax code overhaul than their actual business of fuel-making. The $4.3 billion in combined, one-time tax gains posted by Marathon Petroleum and Andeavor, along with Valero, in the fourth quarter matched the net incomes they reported for all of 2016, according to data compiled by Bloomberg.

--With assistance from Laura Blewitt and Javier Blas

To contact the reporter on this story: Dan Murtaugh in Singapore at dmurtaugh@bloomberg.net.

To contact the editors responsible for this story: Ramsey Al-Rikabi at ralrikabi@bloomberg.net, Alexander Kwiatkowski

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