Marathon Oil Selling Minnesota Assets for $800 Million

CALGARY, Alberta (Reuters) – Marathon Oil Corp (MRO.N) said on Wednesday it will sell most of its refining and marketing assets in Minnesota to three private equity firms for more than $800 million as it streamlines operations during a period of weak profit margins at refineries.

The integrated oil company has signed a nonbinding letter of intent with ACON Investments, NTR Partners and TPG Capital for the sale, which includes the 74,000 barrel a day St. Paul Park refinery and terminal, it said.

The plant, built in 1939, is the smallest among Marathon’s seven refineries. It processes crude mostly from Canada and the upper U.S. Midwest. More than 50 percent of the oil is derived from Alberta’s oil sands.

The transaction also includes 166 SuperAmerica convenience stores along with the SuperMom’s Bakery operation, SuperAmerica Franchising LLC, interests in pipeline assets in Minnesota and associated inventories.

“This was a suite of assets that made sense in that area and it gives us a chance to take the potential proceeds from these and redirect them into different business opportunities,” Marathon spokesman Robert Calmus said.

Marathon shares were up 0.5 percent to $32.41 on the New York Stock Exchange.

Among the private equity players, ACON has diverse holdings such as Chroma Oil & Gas, an independent exploration company, Phoenix-based Pied Piper Pizza, and Telemundo, the No. 2 U.S. Spanish language Television network.

TPG, the former Texas Pacific Group, is one of the world’s largest buyout firms. It was part of a consortium that this week dropped a bid for Fidelity National Information Services Inc (FIS.N) over a disagreement about the price.

North American refining margins have been weak, but have improved from last year’s lows as demand for petroleum products has increased with the economic recovery and companies shut down a handful of refineries.

In the first quarter, Marathon’s refining and marketing operation posted a $237 million loss due to higher oil prices and heavy maintenance at its plants.

Under the letter of intent, the buying group gets a period of exclusivity to negotiate definitive agreements. Marathon said it expects the deal to close in the fourth quarter.

The estimated overall transaction value is expected to be more than $800 million, including inventories at current market values, Marathon said. The company may also get additional contingent payments over a number of years, it said. (Reporting by Jeffrey Jones and Steve James, editing by Gerald E. McCormick and Tim Dobbyn)