Analyst Note| Allen Good, CFA |
Prior to its first-quarter earnings, Marathon Petroleum announced it reached an agreement to divest its retail Speedway segment for $21 billion in cash, $16.5 billion after tax. The deal value is less than the $24 billion we use in our sum-of-the-parts fair value estimate, but still represents a good deal for shareholders. Total value implies a 14.0 times pretax multiple and 11.0 times after tax of estimated 2019 Speedway EBITDA of $1.5 billion, a premium to the average 9.5 times of traded peers. Additionally, the deal releases value for shareholders as the current embedded value of Speedway was well below that level, given Marathon’s total market capitalization is currently only $25 billion. Proceeds will go toward strengthening the balance sheet and returning capital to shareholders. We plan to incorporate the deal into our model, but do not expect a material change to our fair value estimate or no moat rating.