It’s been quite the ride for Marathon Petroleum’s (MPC) planned spinoff of its convenience store business, Speedway. The idea was studied as part of a strategic review in 2017, but ultimately the board determined it wasn’t in the company’s best interests at the time. That decision was surprising given Elliott Management‘s involvement and initial support for the idea. Fast forward to 2019 and the company conducted another lengthy strategic review…but this time the decision was to pursue a Speedway spinoff. It was also perceived as a way to placate activist investor…hedge fund Elliott Management who remains an influential shareholder, and was pushing for the company to split itself into three (!) parts (retail, midstream and refining).
A few months later though, it looked like Speedway would be sold instead. Japan’s Seven & i Holdings (SVNDY) was in talks to make a splash in the USA and buy the company for a whopping $20B+ price tag! Coronavirus began to spread throughout the globe though and the 7-11 chain store owner walked away from the deal having serious valuation concerns. Certainly seems prescient.
With a new CEO in Michael Hennigan, it seemed that the company was back on track for a spinoff until Marathon recently announced that the spinoff would be delayed until Q1 2021 due to the ongoing pandemic. Just a few days later the WSJ reported that Marathon was in talks with Canadian convenience store operator Alimentation Couche-Tard (ANCUF) and potentially others about a sale. Couche-Tard is a major player in the industry and even acquired Valero convenience store spinoff CST Brands back in 2016.
Obviously, it’s a challenging environment for M&A and for the overall industry. Although refining has historically performed strongly in periods with low oil prices, that hasn’t been the case during the global pandemic. Additionally, there are longer term questions about the industry’s future as a result of the shift away from the internal combustion engine.
Ultimately, it’s unlikely the company will approach the valuation it nearly achieved in March, but it does seem that there is a strong desire to sell these assets. It’s not surprising since Elliott has pushed this playbook before (see Hess). A spinoff might be the company’s Plan B, but given the current challenges it wouldn’t be surprising to see an independent Speedway next year.
Disclosure: Author holds no position in any stock mentioned.