Marathon Petroleum Corp MPC is reportedly in talks with potential buyers for its Speedway Retail business, although “any deal is likely weeks away,” according to The Wall Street Journal.
A lack of visibility exists for the stock given the company’s announcement earlier this week that a Speedway spin-off via an IPO is likely to be delayed to the first quarter of 2021, according to BofA Securities.
The Marathon Petroleum Analyst: Doug Leggate maintained a Buy rating on Marathon Petroleum with a $61 price target.
The Marathon Petroleum Thesis: Although this is not the first instance of a report of a possible Speedway sale, such a deal implies upside to the unit’s valuation, Leggate said in a Friday note. (See his track record here.)
A sum-of-the-parts valuation of Speedway excluding West Coast wholesale comes to $12.6 billion, assuming a conglomerate discount rate of 9%, the analyst said. Any deal above this level would be accretive, he said.
“Continued M&A speculation could reignite market focus on the relative quality and potential value of Speedway versus publicly traded peers.”
If the net cash proceeds from either a sale or a spin-off are more than $15 billion, it could “create several options” for the remaining entity, which needs funds to maintain liquidity in the current scenario, according to BofA.
MPC Price Action: Shares of Marathon Petroleum had spiked by more than 6% to $40.90 at the time of publication Friday.
Photo by Daniel Case via Wikimedia.
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