Marathon Petroleum Corp.'s plan to exchange its general partner economic interests in MPLX LP for approximately $10.1 billion in stock has drawn the ire of the former CEO of MarkWest Energy Partners LP, which merged into MPLX in 2015.
In an angry letter dated Dec. 18, John Fox rejected Marathon's appraisal, saying the total was "an unjustified inflated price" that would damage both the company and MPLX.
"Given expectations of available distributable cashflow to the LP for 2018 of $1.9 billion and approximately 796 million outstanding units following the issuance of your 275 million new units as part of the elimination, pro forma distributions will equate to $2.40 per unit," Fox said. "However, if you didn't do the IDR [incentive distribution rights] elimination, I estimate you would be distributing $2.50-$2.55 per unit. How, then, can the IDR elimination be considered accretive as you indicate in your press release?"
Marathon announced Dec. 15 that it had reached a definitive agreement to exchange the general partner interests, including its incentive distribution rights, for 275 million units of MPLX common stock. "The exchange simplifies the corporate structure and provides a clear valuation for [Marathon]'s GP economic interests in MPLX. The exchange eliminates the GP cash distribution requirements of the partnership and is expected to be accretive to distributable cash flow attributable to common unitholders in the third quarter and for the full year 2018," Marathon said in a statement.
The company said the terms had been agreed to by Marathon's board of directors and MPLX's independent conflicts committee.
Fox said Marathon should have requested a "more justifiable number" of 215 million units of MPLX. "By insisting on 275,000,000 units … you, in effect, cripple MPLX and its value creating potential for MPC. Where is the logic in doing that?" he said.
This is not the first time Fox has taken issue with Marathon since the merger with his former company. The owner of more than 1.5 million units of MPLX and 20,900 shares of Marathon Petroleum, Fox said in late 2015 that MPLX would not need "the dead hand" of its general partner siphoning large sums of money away in order to succeed.
Marathon spokesman Chuck Rice said the company declined to comment on Fox's letter.