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FINDLAY — Marathon Petroleum Corp. announced Thursday that it will pay $2.87 billion to buy 1,256 convenience stores from Hess Corp.
The Hess stores will become Speedway stores over the next three years. Speedway LLC is a subsidiary of Findlay Marathon Petroleum.
The deal also includes a transportation fleet capable of transporting about 1 billion gallons a year, as well as other transport operations, including approximately 40,000 barrels per day on Colonial Pipeline, which stretches from Houston to New York.
Marathon CEO Gary Heminger said the acquisition will be “transformative” for the company, offering it a buffer against the volatile refining business.
“As we’ve stated in the past, one of our key strategies is to grow the higher-valued, more stable cash-flow businesses within MPC,” Mr. Heminger said during a conference call Thursday.
Hess, of New York City, is the largest convenience store operator on the East Coast. With the acquisition, Speedway will nearly double its retail presence, going from 1,480 stores in nine states to 2,733 stores in 26 states.
Speedway is the fourth-largest company-owned convenience store chain in the United States, and Hess is fifth.
Tony Kenney, the president of Speedway LLC, said the combined operations will make it the largest company-owned and operated convenience store chain in the United States by revenue, at $27 billion a year.
It will be the second-largest by number of locations, behind Couche-Tard, which operates stores under several names, including Circle K, Dairy Mart, On the Run, and Mac's.
Speedway will double its annual gasoline sales to 6.2 billion gallons and increase sales of food, drink, and other merchandise from $3.1 billion to $4.8 billion. Speedway stores do more merchandise sales than Hess stores, and Marathon Petroleum officials are confident they can grow merchandise sales substantially at the Hess stores.
Marathon officials say there are operational efficiencies to expanding the number of Speedway stores and give it more outlets for its gasoline.
“With this significant geographic expansion, we will be able to further leverage our integrated refining and transportation logistics operations, providing an outlet for an incremental 200,000 [barrels per day] of assured sales from our refining system,” Mr. Heminger said.
The retail stores were only one part of Hess Corp. The company, which ranked 75th on the 2013 Fortune 500, also explores, produces, transports, and refines crude oil and natural gas.
Hess announced in 2013 that it would seek a buyer for its retail operations as it reshaped itself into a pure production and exploration company.
Hess officials said it would use proceeds from the sale for additional stock buybacks.
Marathon Petroleum is No. 33 in the Fortune 500.
The deal announced Thursday consists of $2.37 billion in cash, an estimated $230 million of working capital, and $274 million of capital leases.
Company officials will file documents with the SEC in the next few days. They hope the deal will close late in the third quarter of 2014.
Marathon Petroleum stock fell 78 cents, or 0.9 percent, to close at $86.91 a share Thursday. Hess stock rose 99 cents, or 1.1 percent, to close at $90.29.
Contact Chip Towns at: firstname.lastname@example.org or 419-724-6194.