Marathon - which is the general partner of MPLX and sponsor of the deal for the firm - has decided to increase its cash payment to $1,075 million from the prior level of $675 million. Following the closure of the merger , that was announced earlier this year, MarkWest would become a wholly owned subsidiary of MPLX.
Under the terms of the original deal, MarkWest unitholders would have received 1.09 MPLX units and about $3.37 in cash for each unit they hold.
Per the revised merger agreement, MarkWest unitholders would receive 1.09 MPLX units and about $5.21 in cash for each unit they hold. This amounts to a total consideration of about $52.93 per MarkWest unit according to the closing price on Nov 10. MPLX will not be issuing any new equity units to Marathon in exchange for the additional cash amount. All other terms of the agreement remain unchanged.
In addition to the $1,075 million, Marathon will also provide $225 million in cash to MPLX to maintain its 2% stake in the partnership. This cash will be retained by MPLX to support its growth.
Per Marathon management, the increased contribution reflects the company's confidence in the combination of MPLX and MarkWest. The merger, which would create the fourth-largest master limited partnership in terms of market capitalization, is expected to be significantly beneficial for unitholders as well as customers of the firms.
MarkWest unitholders are expected to benefit substantially from the increased payout. Units of MarkWest gained about 4%, while MPLX units fell over 6% following the announcement. However, Marathon shares remained stable.
The merger deal is expected to complete in the fourth quarter of this year, subject to necessary approvals.
Currently, Marathon Petroleum carries a Zacks Rank #3 (Hold) while both MPLX and MarkWest carry a Zacks Rank #5 (Strong Sell). A better-ranked stock from the energy space is Energy Transfer Equity, L.P. ETE that sports a Zacks Rank #1 (Strong Buy).
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