Marathon drops $1.05bn of assets into master limited partnership
Marathon Petroleum has dropped $1.05bn of assets into its master limited partnership MPLX, follow pressure from activist investor Paul Singer's Elliott Management. The assets in the deal include interests in Explorer Pipeline, Lincoln Pipeline, MPL Louisiana Holdings and Locap. The deal is expected to generate about $138 million in 2018 adjusted earnings before interest, taxes, depreciation and amortisation.

Oil refining and marketing giant Marathon Petroleum Corporation MPC recently divested some of its pipelines and storage assets to MPLX LP MPLX . The move helped Marathon Petroleum to garner proceeds of $1.05 billion from its master limited partnership, which it had spun off in 2012.

Marathon Petroleum has offloaded its entire stake in four jointly owned properties including Explorer Pipeline Co., Lincoln Pipeline LLC, MPL Louisiana Holdings LLC and LOCAP LLC. In each of these properties the company carries 24.51%, 35%, 40.7% and 58.52% interests, respectively. These assets are expected to generate $138 million of adjusted EBITDA in 2018.

The proceeds of the sale will consist of $630 million in stock and $420 million in cash. The equity portion of the deal will see Marathon Petroleum receive common units of MPLX and general partner units. This will enable Marathon Petroleum to maintain its 2% general partner interest in its master limited partnership. The cash portion of the payment will be drawn from MPLX's $2.25 billion revolving credit facility.

The divesture is in sync with Marathon Petroleum's strategic objectives. To accelerate value accretion for shareholders and boost growth, Marathon Petroleum is actively engaged in drop-down transactions lately. In March, the company divested of some of its terminal, pipeline and storage assets to MPLX for $2.02 billion. The company also plans to streamline portfolio and enhance core competencies. For the same, it is soon to a take a final call regarding the spinoff of its retail network unit - Speedway LLC. Marathon Petroleum intends to disintegrate into three standalone businesses - retailing, midstream and refining, thereby optimizing shareholder's value and improve focus in each individually unit. The acquisition of assets is also likely to enhance MPLX's scale and diversity and increase its distributable cash flow per unit.

Zacks Rank and Key Picks

Findlay, OH-based Marathon Petroleum is a leading independent refiner, transporter and marketer of petroleum products. Shares of Marathon Petroleum have gained 8% year to date, significantly outperforming the industry 's 5% decline. The company currently carries a Zacks Rank #3 (Hold).

Some better-ranked players in the same industry are Galp Energia, SGPS, S.A. GLPEY and Par Pacific Holdings, Inc. PARR . Both the companies carry a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 (Strong Buy) Rank stocks here .

Galp Energia expects year-over-year growth of 191.67% in earnings in 2017.

Par Pacific Holdings recorded positive earnings surprises in three of the last four quarters, with an average beat of 195.26%.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.