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A partnership controlled by Marathon Petroleum Corporation agreed Monday to purchase Denver-based transportation company MarkWest Energy Partners for $15.8 billion.

MPLX LP, a midstream master limited partnership sponsored by Marathon Petroleum Corporation (MPC) , signed a definitive agreement to merge with MarkWest Energy Partners.

MarkWest will become a wholly owned subsidiary of MPLX.

The merger will  be a unit-for-unit transaction, generally expected to be tax-free, plus a one-time cash payment to MarkWest unitholders, that implies an enterprise value for MarkWest of  $20 billion.

The total enterprise value includes the assumption of about $4.2 billion of debt, as of the close of trading on July 10, 2015.

MPC will also contribute $675 million of cash to MPLX to fund the one-time cash payment.

MarkWest, a master limited partnership that owns and operates midstream service businesses in several liquids-rich natural gas resource plays in the U.S., is the nation’s second largest processor of natural gas and the largest processor and fractionator in the Marcellus and Utica shale regions.

The combination will create the fourth largest master limited partnership  in the United States with $21 billion in market capitalization.

“This combination is a significant step in executing MPC’s strategy to grow its higher-valued, stable cash flow midstream business, by transforming MPLX into a large-cap, diversified master limited partnership,” MPC president and CEO Gary R. Heminger said.

Heminger said that MPLX affirms its anticipated distribution growth of 29 percent this year and expects a 25 percent compound annual distribution growth rate for the combined entity through 2017.

“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,” Heminger said. 

Heminger also noted that the combination of MarkWest and MPLX eliminates the need for the recently proposed MPLX acquisition of MPC’s marine transportation assets in 2015.

As a result, that transaction has been indefinitely deferred.

The combination is still subject to approval by MarkWest unitholders, customary closing conditions and regulatory approvals.

The deal is expected to close in the fourth quarter of 2015.

Upon completion of the transaction, MPC would continue as general partner of MPLX and own 19 percent of MPLX’s common units.


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