Marathon agrees to buy Andeavor for $23.3 billion

The M&A scenario seems to have picked up in the US with the proposed merger between T-Mobile (TMUS) and Sprint (S). Adding to this, Marathon Petroleum Corp (MPC) today said that it has agreed to take over Andeavor (ANDV) for $23.3 billion, a price estimated at a 24% premium over the latter’s share price as of Friday. The combined entity would become the largest US refiner in terms of capacity and market value.

The deal, which anticipates closure in the second half of 2018, is expected to bring annual synergies of about $1 billion within the first three years. Marathon will also be able to increase its natural gas processing capacity by around 20% following the deal. The deal will also help the company in increasing exports to Mexico.

The transaction is less likely to face too many regulatory hurdles, thanks to the diverse geographic presence of both companies. Marathon operates largely in the Midwest while Andeavor’s operations are mostly in the western part of the US.

A growth in fuel demand and the shale boom has given a boost to the US refining industry. The new entity will have a production capacity of over 3 million barrels of crude per day. The merger will also be beneficial in terms of logistics capabilities.

Additionally, the combination is expected to benefit going forward from regulations that aim to curb pollution from ships. The demand for clean fuels will benefit Marathon in terms of expansion in refining operations.

Shares of Marathon saw a drop while Andeavor’s stock saw a rise following the news.