¨ | Preliminary Proxy Statement | |
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• | Plans to significantly accelerate its dropdown of assets with an estimated $1.4 billion of MLP-eligible annual earnings before interest, taxes, depreciation and amortization (EBITDA) to MPLX LP (NYSE: MPLX) to be completed as soon as practicable (expected in 2017), subject to requisite approvals and regulatory clearances, including tax. |
• | Completion of its initial evaluation of strategic alternatives for its MPLX general partner (GP) interests, including incentive distribution rights (IDRs), indicating it expects to exchange its economic interests in the GP for newly issued MPLX common (LP) units in conjunction with completion of the dropdowns. Details of the transaction are expected to be announced following receipt of the requisite approvals and tax clearance for all dropdowns. |
• | A special committee of the MPC Board will conduct a full and thorough review of Speedway, with the assistance of an independent financial advisor, to ensure optimum value is being delivered to shareholders over the long term. This review will include a tax-free separation of Speedway to MPC shareholders and other strategic and financial alternatives. An update on the review is expected to be provided by mid-2017. |
• | Dropdown of All MLP-Qualifying EBITDA As Soon As Practicable (Expected in 2017). These planned dropdowns are subject to regulatory clearances including tax, requisite approvals and market and other conditions. |
o | A proposed transaction representing ~$250 million of this annual EBITDA is already under review by the conflicts committee of the MPLX Board and the transaction is expected to be completed in the first quarter of 2017. |
o | MPC plans to dropdown an additional ~$350 million of EBITDA-generating assets by the end of the fourth quarter of 2017. |
o | The remaining ~$800 million of EBITDA-generating assets, with ~$600 million of annual EBITDA related to fuels distribution, are expected to be offered to MPLX as soon as practicable once the company has received the necessary tax clearance, which will likely include a private letter ruling from the IRS indicating these earnings will be qualifying income to the partnership under pending IRS regulations. If tax clearance is delayed for the fuels distribution business, then |
o | The company expects these dropdowns to be valued consistent with recent industry precedent valuation multiples ranging between 7.0x and 9.0x EBITDA, subject to the MPLX conflicts committee review process and receipt of customary fairness opinions. MPC also expects the partnership to finance the dropdown transactions with debt and equity in approximately equal proportions, with the equity financing to be funded through MPLX LP units issued to MPC. |
• | IDR Exchange for MPLX LP Units in Conjunction with Completion of the Dropdowns (Expected in 2017). As a part of the substantial acceleration of dropdowns into MPLX, the company, with the assistance of its independent financial advisors, has completed its initial evaluation of strategic alternatives to highlight and capture the value of its GP interest in MPLX while optimizing the partnership’s cost of capital. Based on this review, the company expects to pursue an exchange of MPC’s economic interests in the GP for newly issued MPLX LP units in conjunction with completion of its dropdowns, with the details of the transaction to be announced following the receipt of requisite approvals and tax clearance for all dropdowns. MPC would continue to retain control of the GP following this exchange. This transaction is designed to provide a more tangible valuation of MPC’s economic interest in the GP and reduce MPLX’s cost of capital. |
• | A Full and Thorough Review of Speedway. In keeping with MPC’s practice of evaluating shareholder value creation, a special committee of the MPC Board, with the assistance of an independent financial advisor, will conduct a full and thorough review of Speedway. This review will include a tax-free separation of Speedway to MPC shareholders and other strategic and financial alternatives. The company expects to provide an update on the review by mid-2017. |
• | An Update on the Review of Segment Reporting. Significant portions of the earnings associated with these planned dropdowns are currently reported in the Refining and Marketing segment. As the dropdowns occur, MPC’s segment presentation will be revised to present these earnings in the Midstream segment. Given the significantly accelerated dropdown schedule, the company does not plan to change its segment reporting in advance of the dropdowns. |
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