Marathon energy firm to acquire Marcellus shale gas processor

NEW YORK (Bloomberg) – The pipeline unit of refiner Marathon Petroleum Corp. plans to buy MarkWest Energy Partners LP, the second-largest USA processor of natural gas, for about $15.8 billion in stock and cash.

The deal is expected to close in the fourth quarter, the companies said. There is continued consolidation in the pipeline industry. It will have shipping and processing capabilities for crude oil, refined products and natural gas from Texas to Pennsylvania.

After the deal, MarkWest would become a wholly owned subsidiary of MPLX. The combined company would have a market capitalization of about $21 billion.

As detailed by ValueWalk last month, Energy Transfer Equity, L.P. announced its proposal to merge with The Williams Companies, Inc.in an all-equity transaction valued at $53.1 billion, including the assumption of debt and other liabilities.

The acquisition will be a “unit-for-unit” tax-free transaction including a one-time cash payment to MarkWest unit-holders, MPLX said Monday in a statement. The benefit lies in the ability of the producer customers to increase the value of their growing production in these shale regions.

“MPC’s strong balance sheet and liquidity will enable MarkWest to accelerate organic growth in some of the nation’s most economic and prolific liquids-rich natural gas resource plays”, Heminger said.

Marathon Petroleum will contribute $675 million to fund the cash component of the deal.

MarkWest’s shares were trading at $71.29 before the bell, below the offer price of $78.64. In addition to the attractive premium of 32 percent based on the July 10, 2015, closing price of $59.75, MarkWest unitholders would participate in the combined partnership’s projected peer-leading distribution growth. Jefferies Group LLC acted as financial adviser and Cravath, Swaine & Moore LLP acted as legal adviser to MarkWest.