Should Marathon Petroleum Pay Heed to a Triple Split Bid?

Shares of Marathon Petroleum MPC scaled higher after billionaire activist investor Paul Singer’s Elliott Management Corp suggested the company to break into three separate businesses. Following this development, the stock rose 8.4% in yesterday’s trading to a more than 5-month high.

Claiming that Marathon suffered a long-term undervaluation in the equity market, Elliott recommended the split to help the company better its business scale while enhancing its shareholder value.

In this proposal, Elliott advises the company to disintegrate into three distinct independent concerns, namely RetailCo turning into autonomous Speedway, MidstreamCo converting to MPLX LP MPLX and RefiningCO¬ transforming into New Marathon.

Elliott, which holds a nearly 2.5% stake in Marathon, believes that with this split, the latter will be able to achieve a $22-billion boost to its shareholder value as well as a $17-billion incentive to help the company develop its refining, retailing and marketing businesses. Further, the same could drive its stock value by almost 61% from the current levels.

Notably, Findlay, OH-based Marathon is a leading independent refiner, transporter and marketer of petroleum products. Management responded to Elliott’s proposal stating that the company is in frequent contact with its shareholders and is open to all suggestions that will enrich its shareholder value. Moreover, the company is analysing Elliot’s offer and is planning to delve more into such investor-friendly issues.

This Zacks #3 Ranked stock plunged more than 34% over the past year, underperforming its closest refining peers like Phillips 66 PSX, which is down 13% and Valero Energy Corporation VLO, which dropped 27.5%.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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