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Marathon Petroleum Board, Investors Meet for More Talks

Sources say there is shareholder support for splitting up company
Photograph courtesy of Marathon Petroleum

FINDLAY, Ohio — In the next round of a discussion that began in late September, Marathon Petroleum Corp.’s board met with shareholders Paul Foster and Jeff Stevens on Oct. 16 and with representatives of investors Elliott Management Corp. and D.E. Shaw & Co. on Oct. 17 over the investors’ concerns about the company’s performance, strategy and governance, the Toledo Blade reported.

Foster and Jeff Stevens, who together have a 1.7% stake in Marathon Petroleum, recently sent a letter to the company’s board calling for the removal of the company’s chairman and CEO, Gary Heminger. The letter detailed concerns about the company’s strategy and performance since the $23.3 billion acquisition of refiner-marketer Andeavor in 2018. (Click here to view the full text of the letter.)

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.

Their letter followed a previous communication from New York-based Elliott Management calling for Marathon Petroleum to be split into three independent companies “to unlock significant and sustainable value for its shareholders.” Elliott Management has a 2.5% stake in Marathon Petroleum.

D.E. Shaw, New York, which owns 0.9% stake in Marathon Petroleum, also has been pushing the company to find ways to unlock more value, people familiar with the matter told the Blade.

The sources, who asked not to be identified because the meeting wasn’t public, told board members that they are hearing significant support among shareholders for Heminger to step down, as well as agreement with Elliott’s plan to break up the company, according to the paper. Board members responded that shareholders have told Marathon’s investor relations team that they don’t object to Heminger staying on as CEO, the report said.

Heminger, who was given an exemption from the company’s age-65 mandatory retirement rule in July 2018, the report said, took charge of the company when Marathon Oil Corp. spun off the business in 2011.

In 2016, Elliott Management pushed for Marathon Petroleum to spin off its Speedway convenience stores, prompting an independent strategic review that concluded keeping the retail network as part of an integrated supply chain was in the best interest of shareholders.

  • Marathon Petroleum’s Speedway subsidiary is No. 3 in CSP’s 2019 Top 202 ranking of convenience-store chains by number of company-owned retail outlets.

“Marathon’s board and management team have a longstanding history of engaging with shareholders,” the company said in a statement provided to CSP Daily News. “Marathon has delivered substantial shareholder value under the leadership of Chairman and CEO Gary Heminger, who has the full support of the board. As we have said publicly, the company is conducting a comprehensive strategic review and has been collecting feedback from many shareholders, as is our practice. The review is ongoing and no conclusions have been reached.”

Representatives for Elliott, D.E. Shaw, Foster and Stevens declined comment, the report said.

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. Speedway LLC, based in Enon, Ohio, owns and operates more than 4,000 U.S. c-stores. Marathon Petroleum also owns the general partner and majority limited partner interest in midstream marketing company MPLX.

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