The deal with Saban Elban, which is all about cash, comes less than a year after Marathon split its convenience store chain, Speedway, under pressure from investors, including Elliott Management.
“It was a once-in-a-lifetime opportunity,” said Ryuichi Isaka, president of Saban & Ei Holdings, Saban Elban’s Tokyo parent company. He further said that he sees the convenience stores in the US as the main growth engine of his company, whose convenience stores and supermarkets in Japan are in difficulties.
Previous calls have stopped because of the corona
The Petroleum Marathon, which runs from the town of Findley in Ohio, was close to a deal with the Japanese company earlier this year, but in March talks collapsed, with the outbreak of the corona plague. The company resumed talks in June. Another company that was interested in the deal is the Canadian convenience store chain Elementation Kosha-Tar.
Speedway includes about 3,900 convenience stores, and along with them, the number of Saban Elban stores in the United States and Canada will reach 14,000. Under the agreement, which is expected to close early next year, Marathon will provide Saban Elban with 7.7 million gallons of fuel (about 29 million liters) per year for 15 years.
Invest the money in repaying debts and returning capital to shareholders
“This acquisition is the largest in the history of our company, and it will allow us to continue to grow and diversify our presence in the United States, especially in the Midwest and the East Coast,” said Joe Definto, CEO of Saban Elban.
In recent weeks, a wave of energy deals has been recorded, after a relatively quiet year when it comes to deals in the purchase of oil and gas assets. Last month, Chevron agreed to buy Noble Energy for about $ 5 billion, and Berkshire Hathaway signed a deal to buy Dominion Energy’s natural gas depots and distribution network for $ 4 billion before debt.
The sale of the gas station chain will provide the marathon with cash at a time when it and other U.S. refineries have been hit by declining demand for fuel because of the plague.
Marathon predicts that the deal will generate $ 16.5 billion after tax, which it will invest in repaying debts and returning capital to shareholders.
Saban & A expects to save $ 475-575 million in three years from buying Saban Elban. Isaka, which previously ran the company’s convenience store business in Japan, said the company was trying to change its U.S. store operations to focus more on fresh food and self-branding of products.
According to Isaka, sales of convenience stores rose during the epidemic. Following the acquisition of marathon stations, about a third of Saban & I’s operating profit is expected to come from North America. In the year ended February 2020, this company reported sales of $ 62 billion, and an operating profit of $ 4 billion.
Marathon, which is due to release its second-quarter reports tonight, posted a record $ 9.2 billion loss in the first quarter of this year, after retiring from the $ 12.4 billion balance sheet to cover debt. The company’s stock has fallen more than a third since the end of 2019, slightly above the drop in U.S. oil prices.
Investment firm Elliott has called for the Petroleum Marathon to split into three businesses – a chain of gas stations, pipelines and a gas refinery – to raise value for its shareholders.