Marathon Petroleum Corp., the largest independent U.S. refiner by market value, gained 3.6 percent and outperformed competitors after hedge fund Jana Partners LLC bought a 5.5 percent stake in the company.
The refining company, which was split off from its parent Marathon Oil Corp. last year, rose 3.7 percent to $37.17 at the close in New York. Earlier, the shares gained as much as 5.4 percent to $37.78.
Since an Aug. 1 high of $44.97, Marathon Petroleum has fallen 17 percent, according to data compiled by Bloomberg.
Marathon Petroleum has been under pressure from investors to form a master-limited partnership for some or all of its 9,600 miles (15,450 kilometers) of pipelines, a step that might unlock as much as $3 billion in value, said Fadel Gheit, an analyst at Oppenheimer & Co. Inc. in New York.
Such partnerships, which are traded on exchanges, allow companies to distribute cash generated by certain assets to shareholders without having to pay corporate taxes on the income.
Marathon Petroleum Chief Executive Officer Gary Heminger has said keeping the pipeline assets inside the company is more valuable to shareholders and provides the company with flexibility. Gheit, who rates Marathon Petroleum “outperform” and doesn’t own shares, said Marathon Petroleum should consider stock buybacks instead.
Returning Cash to Shareholders
“By the end of this year, they will be swimming in cash,” Gheit said in a telephone interview today. “Some of this should be returned to the shareholder.”
From Nov. 22 to Jan. 11, Jana acquired 19.7 million shares in Findlay, Ohio-based Marathon valued at $636 million including options, according to a regulatory filing yesterday.
Jana leaders have held talks with Marathon’s management about the company’s business strategy, assets, corporate structure and related matters, according to the filing.
“We share Jana’s view that our company shares are an attractive investment opportunity,” Angelia Graves, a Marathon spokeswoman, said in an e-mail message today. “We are focused on shareholder value and welcome the views of Jana and other shareholders on ways to build such value.”
Charles Penner, a spokesman for Jana, declined to comment yesterday.
Valero Energy Corp., the largest U.S. refiner by oil processing capacity, rose 2.2 percent to $23.51 at the close in New York. Tesoro Corp., the largest U.S. refiner in the West Coast, rose 0.5 percent to $24.18.
Independent refiners don’t explore for or produce oil and natural gas.