Marathon- Speedway Sale Reportedly Back In Play; RBC Says Deal ‘Clear Positive’

Marathon Petroleum (MPC) is again engaging in discussions with potential buyers for a sale of its gas station Speedway unit, according to a report from the Wall Street Journal. Shares in MPC rose 6% in Thursday’s after-hour trading.

Canada’s Alimentation Couche-Tard was one of the buyers reportedly interested in a deal, although no valuation was provided.

The news follows a pre-Covid 19 Bloomberg report that MPC was working on a $22 billion sale of Speedway to Japan’s Seven & I, which fell apart during the crisis.

MPC is still targeting a spinoff of Speedway for 1Q21. The US’s largest refiner was previously looking to split from the chain in Q4 2020, but delayed the move citing market conditions caused by Covid-19.

RBC Capital’s Brad Heffern believes a deal could be a ‘clear positive’ for MPC. “We previously saw a sale of Speedway at a $20+ billion valuation as a “silver bullet” for the issues facing the company” he wrote. In particular, the cash inflow could allow for a repurchase of the dropped refining assets from MPLX, a delevering and potentially a repurchase program.

“We don’t think Speedway’s earnings have been significantly impaired by COVID, so the price could come close to the prior $22 billion valuation” the analyst added.

He has a buy rating on Marathon Petroleum with a $44 price target. That’s roughly in line with the stock’s average analyst price target of $45 (17% upside potential).

Overall, analysts have a cautiously optimistic Moderate Buy consensus on the stock. Shares in MPC have plunged 36% year-to-date. (See Marathon Petroleum stock analysis on TipRanks).

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