Marathon Petroleum to change CEO, split company after hedge fund campaign

(Reuters) - Marathon Petroleum Corp MPC.N chief Gary Heminger will leave next year, the largest U.S. independent refiner said on Thursday, adding it would launch a sweeping restructuring demanded by activist investors, including the spinoff of retail operations.

The changes were a victory for Elliott Management, DE Shaw and other investors that had sought a shakeup to boost the company’s lagging share price following its troubled 2018 acquisition of rival Andeavor. Still, shares slid 3.4% to $63.95 despite third quarter results that topped analysts’ estimates.

The $23 billion Andeavor deal gave Marathon a coast-to-coast refining network. But its shares fell to a two-year low this summer as investors were disappointed with the deal’s impact on results.

Analysts said they were surprised the company’s shares fell so sharply on Thursday even though results beat forecasts and the company announced the restructuring.

Marathon said Chief Executive Officer Heminger would retire in April. It has begun a search for a new CEO. Heminger has worked for Marathon since the mid-1970s and has been at the helm since 2011. Greg Goff, a top executive and former CEO of Andeavor, also will leave Dec. 31, the company said.

“This was not a management change by Elliott,” Heminger told Reuters in an interview on Thursday, saying he had agreed to stay on until the next annual meeting to complete its integration of Andeavor.

“My plan has been that I would work through the annual meeting of 2020. There has been no ousting,” he said, calling the merger one of several “transformative” events during his tenure.

Billionaire Paul Singer’s Elliott, which last month said it owns a 2.5% economic interest in Marathon, has argued a three-way split of the company would boost shareholder value by as much as $40 billion.

As well as spinning off the retail gas station business Speedway, Marathon said it was launching a strategic review of its pipeline and storage operations. The two businesses provide about half of Marathon’s earnings. Speedway will trade as an independent public company after the separation is completed.

Elliott said it supported the moves announced on Thursday, adding it expected these measures would unlock substantial value for shareholders.

Former Andeavor board members Paul Foster and Jeff Stevens, who together own about 1.7% of Marathon, also had backed the proposals and had called for Heminger’s immediate removal. The two declined to comment on Thursday.

“We see this (spinoff) as unlocking significant value for current MPC shareholders,” analysts at Edward Jones wrote in a note.

Separately, Marathon beat analysts’ estimates for quarterly profit on Thursday, posting adjusted profit of $1.63 per share, compared to analysts’ average estimates of $1.38 per share, according to IBES data from Refinitiv.

Net income attributable to the company rose 48.6% to $1.10 billion, or $1.67 per share, in the quarter ended Sept. 30. It earned $1.62 a share in the same quarter a year ago.

Before the day before Elliott made its call for changes, Marathon’s shares were down about 6% with the stock up about 12% for the year through Wednesday’s close.

Reporting by Shradha Singh and Shanti S Nair in Bengaluru; Editing by Subhranshu Sahu, Gary McWilliams and David Gregorio