MPLX LP, a Findlay, Ohio-based master limited partnership (MLP) formed by Marathon Petroleum Corp. in 2012, and Denver-based MarkWest Energy Partners LP have agreed to a unit-for-unit merger deal in which MarkWest will become a wholly owned subsidiary of MPLX. The deal, valued at $15.8 billion in stock and cash excluding debt, is expected to close in the fourth quarter.
The companies describe the deal as one combining the nation’s second-largest processor of natural gas and largest processor and fractionator in the Marcellus and Utica shale plays in MarkWest with a growing crude oil and refined products logistics partnership in MPLX. They say the deal will create the fourth-largest MLP based on a market capitalization of $21 billion.
MPLX assets consist of 99.5% equity interest in a network of common carrier crude oil and products pipeline assets in the Midwest and Gulf Coast regions and 100% interest in a butane storage cavern located in West Virginia with 1 million bbl of NGL storage capacity.
The combined entity will further MarkWest’s midstream presence in the Marcellus and Utica by allowing it to pursue additional midstream projects, the companies say. The deal also provides vertical integration opportunities, as Marathon is a large consumer of NGLs.
“[Marathon’s] strong balance sheet and liquidity position will enable MarkWest to accelerate organic growth in some of the nation’s most economic and prolific natural gas resource plays that it may have been limited in pursuing otherwise,” explained Gary R. Heminger, MPLX chairman and chief executive officer.
Following completion of the deal, the MarkWest executive team will become executive officers of MPLX in similar roles, report to Heminger, and remain in Denver. Semple will become executive vice-chairman of MPLX. Two existing directors of MarkWest, including Semple, will be appointed to the board of the general partner of MPLX and Semple will be appointed to the board of directors of Marathon.
The merger is expected to be tax-free, plus a one-time cash payment to MarkWest unitholders that implies a total enterprise value for MarkWest of $20 billion, including the assumption of debt of $4.2 billion.
In the agreement, common unitholders of MarkWest will receive 1.09 MPLX common unit and a one-time cash payment of $3.37/MarkWest common unit, for total consideration of $78.64/MarkWest common unit, based on fully diluted units currently outstanding and the closing price of MPLX’s units on July 10.
MPLX’s sponsor Marathon will contribute $675 million of cash to MPLX to fund the one-time cash payment. Upon completion, Marathon will continue to own the general partner of MPLX and 19% of MPLX's common units.