Hedge fund takes aim at Findlay’s Marathon Corp.

1/21/2012

A New York hedge fund with a reputation as an “activist” shareholder has become Marathon Petroleum Corp.’s largest shareholder and has told the Findlay-based oil refiner that it will take action as needed to raise shareholder value.

Jana Partners LLC, a fund founded by Barry Rosenstein, a fund manager whom Forbes magazine previously listed among the 400 richest Americans, disclosed Thursday in regulatory filings that it had acquired 19.7 million shares of Marathon Petroleum, becoming the company’s largest shareholder with a 5.5 percent stake.

In the filing, Jana, which has a track record of pressing companies to break up, engage in stock repurchases, or hire new management, said it had spoken to Marathon Petroleum management about its “business strategy, corporate and asset structure, capitalization, dividend and repurchase policy, governance and related matters.”

Jana added it may have further talks with management, directors, shareholders, or others and “may take other steps seeking to bring about changes to increase shareholder value as well as pursue other plans or proposals that relate to or would result in any of the matters set forth” in its filing.

Charlie Penner, a spokesman for Jana, had no comment.

Angelia Graves, a Marathon Petroleum spokesman, confirmed that company executives had met with Jana and said, “We do share the view that Marathon Petroleum is an attractive shareholder opportunity and we will be doing what we can to increase shareholder value.” She would not discuss Jana’s plans.

Last year Jana pressed McGraw-Hill Cos., parent company of Standard & Poor’s, to break up into four companies to unlock more value for shareholders. Jana also boosted its investment last year in energy firm El Paso, after which the company split in two.

Marathon Petroleum, which does oil refining and fuel marketing, was created last July after being spun off by its parent firm, Marathon Oil Co., of Houston, which now focuses on oil and gas exploration and drilling.

Analysts said Jana’s interest in the Findlay firm may be to force it to form a master limited partnership to control some or all of its 9,600 miles of pipelines or its chain of Marathon and Speedway gas stations.

Stacey Hudson, an analyst with Raymond James & Associates in Houston, said there have been complaints from analysts and shareholders that Marathon won’t split off its assets into a master limited partnership.

She said, “They’ve always said that … they appreciate the integration of their assets, and that you make an MLP when you need cash, and they don’t need the cash.”

In his report in November, Deutsche Bank Securities analyst Paul Sankey said a small master limited partnership “could be the way forward” although there was “zero hope” of one occurring.

Fadel Gheit, an analyst at Oppenheimer & Co., said Jana probably wants a master limited partnership at Marathon Petroleum but it’s not the best route for the company.

“It’s a gimmick and nothing more than a gimmick. Hedge funds, they always want the shortcut,” Mr. Gheit said.

Jana may try to force changes, but Mr. Gheit said he doubts Marathon executives will be pressured.

Marathon Petroleum’s stock rose $1.32 a share to $37.17 Friday on the New York Stock Exchange. The company has 356.5 million shares outstanding, according to the Wall Street Journal.

Contact Jon Chavez at: jchavez@theblade.com or 419-724-6128.