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UPDATE 3-Elliott unveils Marathon Petroleum stake, urges breakup

(Adds Evercore role, nomination deadline, analyst note)

By Michael Flaherty

Nov 21 Elliott Management unveiled it has a 4 percent stake in Marathon Petroleum Corp on Monday, urging the company in a letter to launch a strategic review and consider spinning off its three main businesses.

Marathon responded by saying it disagreed with the letter to its board and was moving ahead with its own plan, a reply that signaled rising tension between the refiner and the activist investor.

Marathon has hired boutique investment bank Evercore Partners to advise on its engagement with Elliott, people familiar with the matter said. Marathon and Evercore did not immediately return calls seeking comment on the defense plan.

The deadline for Marathon shareholders to nominate directors is Dec. 15, meaning Elliott could seek board seats if talks between the two sides fail to improve.

Elliott, which joins fellow activist Jana Partners as a Marathon shareholder, also said the company needs to speed up its so-called "drop down" plan related to its master limited partnership, MPLX Inc..

Findlay, Ohio-based Marathon last month said it would seek to place some of its assets into MPLX, a move Jana said it supports.

Elliott, however, said the company should proceed with the drop down immediately and better communicate what is being put into MPLX.

"We believe the recent strategic announcement exacerbated the uncertainty surrounding MPLX," Quentin Koffey, a portfolio manager at Elliott, said in the letter.

Marathon should consider spinning off just Speedway, its retail chain of gasoline and convenience stores, or all three of its retail, refining and pipeline businesses.

Marathon shares were up 5 percent at $45.70 on Monday while MPLX's stock was up 3 percent to $33.98.

"We agree with Elliott Management that there is upside to our valuation, which we are addressing with the value-creating actions we announced last month, but we disagree with their letter and presentation," Marathon CEO Gary Heminger said on Monday.

Elliott's stake makes it Marathon's fourth largest shareholder.

Cowen & Co said in a research note that a retail spin-off was less likely than speeding up the drop down plan.

Jana's managing partner, Barry Rosenstein, said in October he supported the shift of assets to MPLX and the possible changes to Marathon's financial reporting that would result. Jana, which raised its stake in the company to 0.8 percent last quarter, has been a Marathon investor dating back to 2012, when it pushed the company to spin-off MPLX.

(Additional reporting by Arathy S Nair in Bengaluru; Editing by David Gregorio and Alan Crosby)

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