Deal of the Week: Hess to Sell Retail Arm to Marathon for $2.6B

Announcement Date  May 22, 2014 Acquirer  Marathon Petroleum Corporation (NYSE: MPC) Acquirer Description  Engages in refining, transporting, and marketing petroleum products primarily in the United States. Operates through three segments: Refining & Marketing, Speedway, and Pipeline Transportation  Headquartered in Findlay, Ohio Acquirer Financial  Mkt Cap: $25.2 billion  LTM EBITDA: $3.8 billion Statistics  EV: $26.6 billion  LTM EV / Revenue: 0.3x  LTM Revenue: $93.9 billion  LTM EV / EBITDA: 7.0x Target Company  Hess Corporation (NYSE: HES) Target Description  An exploration and production (E&P) company; develops, produces, purchases, transports, and sells crude oil and natural gas worldwide  Founded in 1920 and headquartered in New York, New York Target Financial  Mkt Cap: $28.6 billion  LTM EBITDA: $6.3 billion Statistics  EV: $32.9 billion  LTM EV / Revenue: 1.5x  LTM Revenue: $21.7 billion  LTM EV / EBITDA: 5.3x Price / Consideration  Price: $2.6 billion  Consideration: Cash Acquirer Advisor  Barclays Target Advisors  Goldman Sachs and JPMorgan Chase Rationale  “The sale of our retail business marks the culmination of our strategic transformation into a pure‐play exploration and production company,” John B. Hess, the company’s chief executive, said in a statement  The combined business reported roughly $27 billion in pro forma revenue last year, as well as 6.2 billion gallons in annual fuel sales and $4.8 billion worth of merchandise sales  “This acquisition will be transformative for MPC and Speedway as it will significantly expand our retail presence from nine to 23 states through these premier Hess locations throughout the East Coast and Southeast,” stated Marathon’s chief executive  With the deal, Marathon will gain 1,256 convenience stores in 16 states. Marathon’s Speedway subsidiary is slightly bigger, with 1,480 stores in nine states Deal Points  The Hess Corporation will sell its retail arm to Marathon Petroleum for $2.6 billion as it focuses on exploring and drilling for oil  The company plans to use proceeds from the sale to increase an existing stock buyback program, to $6.5 billion from $4 billion Of Note  The sale will conclude a yearlong effort by Hess to slim down its operations and improve shareholder value as it focuses its efforts on exploring and drilling for oil

[email protected] www.pillarsofwallstreet.com