Marathon Petroleum Partnership to Buy MarkWest for $14.69 Billion

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NEW YORK (AP) — A partnership run by Marathon Petroleum will spend $14.69 billion to buy MarkWest Energy Partners, a company that splits natural gas into other fuels.

The combined company will have a market capitalization of $21 billion and tie up Marathon’s huge pipeline network with the refiner.

The cash-and-stock deal values MarkWest units at $78.64 each. The companies said the purchase includes $4.2 billion in debt held by MarkWest. The companies value the deal at $20 billion and expect it to be completed during the fourth quarter. Denver’s MarkWest will become a unit of MPLX LP, a midstream partnership created by Marathon Petroleum.

MarkWest is among the biggest natural gas processors in the U.S. and has major operations in and around Texas. But it’s also active in major shale plays line Marcellus in the Northeast and Utica on its western border.

Common units of MarkWest closed at $59.75 on Friday, meaning the purchase price represents a 32-percent premium. MarkWest Energy Partners LP’s units rose $5.60, or 9.4%, to $65.35 in morning trading. Marathon Petroleum was the biggest gainer on the S&P 500 around midday, as its shares rose $5.01, or 9.2 percent, to $59.51.

Since MPLX and MarkWest are both master limited partnerships, the deal creates one of the largest master limited partnerships in the world. Companies in the oil and gas sector often create those partnerships because they provide the tax benefits of a limited partnership and the liquidity of a publicly traded company.

Marathon Petroleum is one of the largest processors of natural gas in the U.S. It sells its gasoline at about 5,500 retail outlets and also runs the second-largest convenience store chain in the U.S., Speedway, which has about 2,750 locations.

Marathon Petroleum also canceled a plan to transfer its marine transportation assets, including towboats and tank barges used to transport oils, renewable fuels and chemicals, to MPLX.

Units of MPLX LP fell $11.34, or 16.4 percent, to $57.71.