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Barry Rosenstein’s Jana Partners Buys 5.5% Stake in Marathon $MPC

JANA PARTNERSBarry Rosenstein’s Jana Partners has taken a 5.5% stake in Marathon Petroleum Corp (MPC), a move which makes the fund the refiner’s biggest shareholder. “It spent $636 million buying more than 19.7 million Marathon Petroleum shares” write the Wall Street Journal. “Jana also said it has options, exercisable Feb. 17, to buy 896,000 more shares at $27.50 each.”

MPC is one of the largest refiners in the US as measured by capacity, writes the Wall Street Journal. The company owns or operates roughly 10,000 miles of pipelines. MPC was formed in June after Marathon Oil Corp (MRO) spun off its refinery business, keeping its exploration operations. The move was smart one. An oil company’s refinery business can be a drag on its profits from exploration, causing sme analysts to argue for further separation throughout the industry. “Refineries are typically valued at around four to five times earnings before interest, taxes, depreciation and amortization while pipeline businesses are normally valued between 10 to 11 times Ebitda.”

Jana Partners said “in a regulatory filing that it has had discussions with Marathon about its operations but didn’t provide further details.” In the past, Jana Partners has worked with “other companies last year to separate business units in an effort to realize more value.” For instance, “in May, Jana increased its stake in El Paso Corp. in an effort to break up the natural-gas provider and sell its exploration-and-production (E&P) operations.” El Paso later decided to spin off its E&P business. Although it ultimately sold itself to Kinder Morgan in a $21.1 billion deal.