If you remember, Hess has been under pressure from activist investors to get “mean & lean” and spin-off or sell underperforming and non-core assets. That’s included much of its downstream and refining portfolio.
The final piece to this has been the firm’s classic green-and-white branded retail service stations. Those stations and their eastern seaboard locations were expected to fetch a pretty penny — with both private equity and other integrated energy firms expected to make big bids.
Well, the wait for a buyer is now over. Refining giant and rival Marathon Petroleum (MPC) has decided to step up and snag Hess’s retail assets.
And while the deal is a boon for HES stock and its bid to become a North American-focused E&P firm, the biggest winner could be MPC stock investors. The deal provides plenty of benefits for Marathon and could set-up a juicy spin-off in the future.
MPC Adds 1,300 Convenience Stores
So far, most of the market commentary on Hess’s sale has focused on HES stock and fate of its famous Hess Truck Christmas promotion. However, the real action could be in acquirer Marathon Petroleum. The firm is paying $2.87 billion for HES retail and transport network. That money may actually be a great deal for MPC stock investors in the longer term.
First for that price, MPC is gaining control of 1,256 branded retail stores in 16 states. Those stores dot the East Coast and Southeast. More importantly, they will complement Marathon’s current 1,480 Speedway convenience stores it owns across the U.S. Midwest. Together, the combination of stores will be the largest U.S. chain of convenience stores by revenue. Marathon also sells fuel at 5,200 independent retail outlets. Based on last year’s numbers, the newly joined group will have forma revenue of more than $27 billion.
Aside from that hefty revenue, all those gallons of gas, hot dogs and sodas do have another purpose — namely smoothing out bumpy refining revenue.