(New throughout, adds details from agreement, background)
By Michael Flaherty
Sept 5 (Reuters) - U.S. refiner Marathon Petroleum Corp said on Tuesday it would keep its Speedway retail arm, a decision backed by activist investor Elliott Management, which had previously pushed the company to separate the business.
Last November, Elliott, the $33 billion hedge fund, unveiled a 4 percent stake in Marathon and made several demands including urging a spin-off of Speedway, which runs gas stations and convenience stores across the United States. .
Marathon’s decision to keep the business represents a unique case where a company has opted against an Elliott demand, yet still managed to earn the hedge fund’s support.
Senior portfolio manager John Pike said in a statement that Elliott approved of the other steps Marathon has taken to boost its stock price and said he appreciates the company’s effort.
“While we see value in a spin of Speedway, today’s decision to maintain an integrated Speedway came after a full, rigorous and independent review,” Pike said in the statement. Pike added that Elliott was confident Marathon will take further actions to boost its value.
Elliott’s initial demands last November included encouraging the company to speed up a plan to drop down certain Marathon assets into its master limited partnership, MPLX Inc..
Elliott’s investment prompted the Ohio-based refiner to announce in January a series of steps to increase its stock price, including the possible separation of Speedway.
Marathon said on Tuesday that the company has outperformed its peers this year, and returned $1.55 billion to shareholders through buybacks and dividends.
Marathon listed the reasons why keeping Speedway was a better option, saying a spin off would require at least $2.5 billion of debt reduction and an additional $1 billion of cash to manage leverage targets and its investment grade rating.
Gary Heminger, Marathon’s chairman and CEO, said in the release that the company has benefited from its dialogue with Elliott, which has since reduced its holding in the company to around 1 percent.
Marathon’s shares were down 4.5 percent at $51.84. (Additional reporting by John Benny in Bengaluru; Editing by Saumyadeb Chakrabarty and David Gregorio)