By STEPHEN CUNNINGHAM and JIM POLSON
Hess Corp. agreed to sell its gasoline stations to Marathon
Petroleum for $2.6 billion, the latest and largest in more
than $12 billion of asset sales as the company focuses on
producing oil and natural gas.
Hess found a buyer after filing paperwork in January to put
the 1,342 stations along the US East Coast into a
separately-traded public company. The deal is part of its
effort to streamline operations following pressure from
activist investor Paul Singers Elliott Management last
The sale of our retail business marks the culmination
of our strategic transformation into a pure-play exploration
and production company, CEO John Hess, son of the New
York-based companys founder, said in a statement. Hess
said in a separate statement it will continue its 50-year
practice of selling holiday toy trucks at the stations this
year, and going forward they will be sold online.
Marathon Petroleum, which was itself formed by the spinoff of
Marathon Oil's refinery
and retail business, said
the purchase will make it one of the largest owner and
operator of convenience stores in the US, with locations in
23 states. The deal also includes transport trucks and
capacity on the Colonial pipeline.
Marathon Petroleum put the transactions total value at
$2.87 billion. That comprises a cash purchase price of $2.37
billion, an estimated $230 million of working capital and
$274 million of capital leases, it said in a separate
The acquisition is expected to be funded with a combination
of debt and available cash, with closing likely in the third
quarter, Findlay, Ohio-based Marathon Petroleum said.
CEO Gary Heminger has openly coveted the Hess stores, telling
analysts on an October earnings call that they have one
of the best-looking systems on the East Coast.
The purchase is a win-win situation and not totally
unexpected, Fadel Gheit, a New York-based analyst for
Oppenheimer & Co., said today in a telephone interview.
What Hess got was at the high end of Street estimates
and much higher than we thought they could do.
Proceeds from the sale will be used for additional share
repurchases. Hess increased its buyback authorization to $6.5
billion from $4 billion, the company said.
With the latest transaction, Hess has raised $12.2 billion
from asset sales since 2013, Gheit wrote in a note to
clients. This is the biggest divestiture, followed by the
$2.05 billion sale of the companys Russian subsidiary
Samara-Nafta to OAO Lukoil in April 2013.
Hess is one of several energy companies, including
ConocoPhillips and Marathon Oil, that have gotten rid of
retail stations as they separate so-called downstream
operations from oil and gas production in response to
investor calls for more focused corporate structures.
Hess operates fuel and food outlets from Florida to New
Hampshire and is the largest Dunkin Donuts franchisee
by number of sites, according to the January filing. The
company had $943 million invested in the retail business as
of Sept. 30, the filing showed.
Barclays acted as financial adviser to Marathon Petroleum and
Goldman Sachs advised Hess.