CVR Energy Nears a Deal to Buy Two Marathon Refineries
CVR Energy is nearing a deal worth more than $4 billion to acquire refineries from Marathon Petroleum, according to a Wall Street Journal report cited by Reuters.
The company has already put a version of the transaction on paper. CVR announced a definitive agreement, which is a signed contract, to acquire Marathon's St. Paul Park refinery in Minnesota and its Mandan refinery in North Dakota, together with a marketing platform. CVR called the deal "transformative" in its announcement. The company describes the two refineries as well-maintained and highly productive, and says they generated more than $1.1 billion of EBITDA, or earnings before interest, taxes, depreciation and amortization. EBITDA is a common measure of a business's operating profit before financing and accounting costs.
The price for the refineries is lower than the Journal's headline number. Marathon will receive $3.45 billion for the St. Paul Park and Mandan facilities, according to local reporting on the sale. The "more than $4 billion" figure is a reported value for the deal as it was being negotiated, and it sits alongside the $3.45 billion without a published breakdown tying the two together. Readers should keep the two numbers apart until the parties' filings show what the marketing platform and any other elements carry in price.
Taking the figures at face value gives a rough cross-check. Against CVR's "more than $1.1 billion" EBITDA figure, a $3.45 billion price works out to no more than about 3.1 times EBITDA. That ratio, the price divided by one year's operating profit, is much like judging a rental property by its annual rent. It is a crude multiple. It depends on which period CVR's EBITDA covers, whether it reflects a normal margin environment, and how much of the purchase price is for working capital or inventory rather than fixed assets. It is useful as a sanity check on the seller's price. It is not a valuation.
The broader context here is that St. Paul Park and Mandan are both Upper Midwest assets, and a change in ownership changes who controls their crude sourcing, product offtake and capital budgets. CVR, which is already in the refining business, would be taking on two large plants at once. Marathon, for its part, would be exiting these two facilities. For people outside the industry, the practical effect is indirect. Refinery ownership shapes regional fuel supply, and it can shape how quickly a plant gets maintenance spending or capacity upgrades.
Two things are not settled. The first is whether the deal described as nearing in the Journal report is the same agreement CVR announced, or whether the value and scope have moved since. The second is timing. The announcement describes a signed contract, not a completed acquisition, and a closing would depend on conditions the company has not been reported to have met.
For now the sound reading is narrow. CVR has agreed to buy two Marathon refineries and a marketing business, the sale price for the refineries is $3.45 billion, and the headline value of the wider transaction is reported above $4 billion. Whether the price looks cheap or full will depend on the EBITDA CVR is actually able to deliver from these plants, which the company has so far only described in general terms.
