Marathon Petroleum Corp.'s pipeline unit MPLX LP is reportedly buying natural gas processor MarkWest Energy Partners LP for almost $15.8 billion in stock and cash. Unfortunately, the acquisition is currently facing controversies after an investigation was announced by Brodsky & Smith, LLC Law Firm for potential breaches of fiduciary duty and other state law violations with regards to the deal, CNN Money revealed.
Marathon's MarkWest deal will create the fourth-largest MLP (Master Limited Partnership) by market value, which is $21 billion. According to Irish Times, the natural gas processing facilities' purchase will be an addition to MPLX's substantial crude portfolio.
"MPC's strong balance sheet and liquidity will enable MarkWest to accelerate organic growth in some of the nation's most economic and prolific liquids-rich natural gas resource plays," Marathon's Chief Executive Officer Gary Heminger said.
The Marathon-MarkWest merger is expected to increase the company's dividend by 25 percent through 2017 while maintaining a 29 percent dividend growth for 2015. It also shows that interests in mergers continue to expand for pipelines and processing unit owners despite oil prices reductions of more than 50 percent since 2014.
MarkWest is a company that processes and transports natural gas from the US shale boom. MPLX, on the other hand, operates a network of crude oil and product pipelines in the US Midwest and Gulf Coast regions.
The $15.8 billion acquisition will be Marathon's major expansion, Bloomberg Business noted. The company, which built MPLX in 2012, will contribute $675 million to fund the cash component of the deal. It will also assume MarkWest's debt of about $4.2 billion.
"This combination creates a unique new competitor in the midstream sector," Heminger said. "The success of this combination centers on sustainable growth."
Meanwhile, the litigation law firm Brodsky & Smith, LLC announced Tuesday that it is investigating potential claims against the Board of Directors of MarkWest Energy Partners, LP. As per PR Newswire, the probe is in connection with the merger that concerns the possibility of fiduciary duty breaches along with other violations of state law.
"The transaction may undervalue MarkWest and will result in a loss or no real gain for many MarkWest unitholders," the law firm said in its statement.
In line with the merger, the Marathon-MarkWest deal is expected to close in the fourth quarter of this year.
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