UPDATE: Marathon Petroleum provided the following letter (edited for length) to CSP Daily News that Chairman and CEO Gary Heminger sent to Marathon Petroleum employees in response to the letter from shareholders Stevens and Foster calling for Heminger to be replaced over concerns related to MPC’s performance, strategy and corporate governance:
The board and I are committed to doing the right thing for this company and its shareholders. While we know that we have work to do, we believe the letter is grossly misleading, and it contains a number of significant inaccuracies. I want you to have the facts.
First, their letter alleges that we were unwilling to meet with them. That is simply untrue. I met with both of them in early August, and our Lead Independent Director Jim Rohr spoke with them in separate telephone conversations after that. In addition, we had a follow up meeting set for Sept. 30, which the individuals canceled. They did not respond to our offers to reschedule. …
Second, the letter falsely claims that we have failed to capture synergies following the strategic combination with Andeavor. The fact is that we are tracking well ahead of announced synergies targets and are proud of the progress our employees have made over the past year. As noted on our second-quarter earnings call, we had achieved roughly $400 million in synergies at that point and are well on track to achieve our target of up to $600 million of annual gross run-rate synergies by year-end 2019, and $1.4 billion by the end of 2021—a 40% increase from our original estimate when our combination with Andeavor was announced. …
You should know that MPC's management team and independent board have a strong track record of taking action to deliver shareholder value. Since becoming an independent company in 2011 and as we stated publicly on Wednesday, MPC has generated total shareholder return of 254%, exceeding the S&P return of 174%. MPC has also returned over $20 billion to shareholders through dividends and share repurchases. …
As regards the call for me to step down, I will always do what’s right for the company, and I serve at the pleasure of the board.
Sincerely,
Gary R. Heminger, Chairman and CEO
SCOTTSDALE, Ariz. — Marathon Petroleum Corp. (MPC) shareholders Paul Foster and Jeff Stevens, who together have an approximately 1.7% stake in MPC, have sent a letter to MPC’s board calling for the immediate replacement of the company’s chairman and CEO.
The action follows the Sept. 25 letter from investor Elliott Management calling for Marathon Petroleum Corp. (MPC) to be split into three independent companies “to unlock significant and sustainable value for its shareholders.”
Foster and Stevens’ letter also details concerns related to MPC’s performance, business strategy and corporate governance since the $23.3 billion acquisition of refiner-marketer Andeavor in 2018. (Click here to view the full text of the letter.)
In a statement provided to CSP Daily News, James Rohr, Marathon Petroleum’s lead independent director, said, “The board of directors is firmly and unanimously supportive of Gary Heminger as MPC’s chairman and CEO and his track record of delivering value to shareholders and all of the company’s constituencies."
Foster is a co-founder and former chairman of Western Refining and a former board member of Andeavor, and Stevens is a co-founder and the former CEO of Western Refining and former board member of Andeavor and Andeavor Logistics. Their private-equity firm, Franklin Mountain Capital, is based in Scottsdale, Ariz.
“Although [we] preferred to forge a truly meaningful private dialogue with Marathon’s leadership about their recommendations for enhancing stockholder value, efforts to do so were either dismissed or rebuffed,” Foster and Stevens said.
According to Foster and Stevens’ letter:
- Marathon’s stock continues to trade at a persistent and glaring discount to both a sum-of-the-parts valuation and relative to its peers.
- Leadership has failed to deliver the type of growth and profitability it suggested could be produced by an integrated business model.
- Leadership has failed to capture synergies necessary to justify an integrated business model.
- Marathon has embraced both insular investor relations practices and poor governance, as evidenced by its combined chairman and CEO role, staggered board and lack of financial reporting clarity.
- Marathon has failed to attract and maintain a best-in-class executive team, as evidenced by its decision not to fill its chief operating officer role.
- Marathon failed to successfully integrate Andeavor, leading to a critical loss of talent.
Findlay, Ohio-based Marathon Petroleum, an integrated downstream energy company, operates 16 refineries, and its marketing system includes approximately 7,800 branded locations across the United States, including about 5,600 Marathon brand retail outlets. Its subsidiary Speedway LLC, based in Enon, Ohio, owns and operates more than 4,000 U.S. convenience stores. Marathon Petroleum also owns the general partner and majority limited partner interest in midstream marketing company MPLX.
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