April 30, 2018 / 3:02 AM / 10 months ago

UPDATE 5-Marathon creates top U.S. refiner with $23 bln Andeavor deal

* Marathon paying $152/share to create biggest independent refiner

* Andeavor assets include pipelines, refineries, gas stations

* Marathon CEO Heminger to head combined firm

* Andeavor shares surge 14.5 pct, Marathon down 5 pct (Adds analyst quote, updates shares)

By John Benny

April 30 (Reuters) - Marathon Petroleum Corp said on Monday it would buy rival Andeavor for more than $23 billion, forming a company that will leapfrog Valero Energy Corp as the largest independent U.S. refiner by capacity.

The cash-and-stock deal marries operations that are broadly complementary in terms of geography as well as giving Marathon extra capacity in the U.S. light crude produced by a booming shale oil sector.

The deal values Andeavor, formerly known as Tesoro, at about $152 per share, a premium of about 24 percent to closing prices on Friday, driving shares in the San Antonio-based firm 14 percent higher in premarket trading on Monday.

Marathon shareholders were less upbeat, knocking 5 percent off the company's stock price despite the board approving an additional $5 billion share buyback.

"We view this as pretty full value for Andeavour," analysts from Scotia Howard Weil said in a note. "Not many saw this one coming."

The proposed combination would be the largest in refining since Holly Oil acquired Frontier Corp in 2011, but analysts at Tudor Pickering Holt said they expected the location of the two companies' operations to allow them to avoid antitrust hurdles.

"Despite the size of Marathon-Andeavor, we do not foresee any regulatory problems," they wrote in a note on the deal.

Shale oil fields have pushed U.S. crude production to record highs and industry experts argue operations that have capacity to refine light crude like Andeavor will be better positioned to take advantage of the boom.

Andeavor also runs refineries in Alaska, California, Minnesota, New Mexico, North Dakota, Texas, Utah and Washington which should complement Marathon's largely eastern plants.

Including Andeavor's debt, Marathon is paying $35.6 billion to hold 66 percent of a combined company worth some 58 billion at closing stock market prices on Friday.

It will have the capacity to process about 3.1 million barrels per day along with a large network of filling stations and oil and natural gas pipelines.

Marathon Chief Executive Gary Heminger, who oversaw a 20 percent rise in net profit in the first quarter, will run the combined company, with a senior role for Andeavor's chief executive, Gregory Goff.

"Each of our operating segments are strengthened through this transaction," Heminger said in a statement.

"It geographically diversifies our refining portfolio into attractive markets......enhances our midstream footprint in the Permian basin, and creates a nationwide retail and marketing portfolio," he added.

In a separate release on Monday, Marathon missed Wall Street forecasts for quarterly profit by a wide margin, as its expenses jumped 15 percent on the back of a surge in refining driven by the boom in U.S. crude production.

The Andeavour deal is expected to close in the second half of this year. (Reporting by John Benny and Shubham Kalia in Bengaluru, Gary McWilliams in Houston; Editing by Patrick Graham and Anil D'Silva)

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