Marathon Reverses Course, Embraces Activist's Proposals
Our narrow moat rating is unchanged as the firm embraces actions proposed by Elliot Management.
Providing an update on its strategic actions to enhance shareholder value, best idea
Management plans to provide an update on the review of the Speedway segment by mid-2017 with a tax-free spin-off the most likely outcome. Elliot Management previously argued ownership of Speedway was not adequately reflected in Marathon's share price and that operational benefits of integration were not material enough to justify a combined structure.
While our model reflects management’s prior plan to drop assets over the course of three years, we already incorporated a higher distribution growth rate for MPLX in our last update. We also previously accounted for the value of the GP interest. As a result, neither announcement impacts our fair value estimate. We currently consider Speedway as a consolidated entity, but valuing it separately may result in a modest increase to our fair value estimate. Our narrow moat rating is unchanged.
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