CVR Energy Agrees to Buy Two Marathon Refineries and Marketing Business for About $4.2 Billion

The deal in plain terms

CVR struck a deal to purchase Marathon Petroleum's St. Paul Park refinery in Minnesota and the Mandan facility in North Dakota, along with a connected marketing business, for roughly $4.2 billion. If the transaction closes, CVR's crude processing capacity would climb to roughly 384,000 barrels per day, up from around 207,000.

The marketing unit supplies as many as 590 branded sites across the Upper Midwest and Northern Great Plains. CVR said the properties being acquired could have pushed its earnings to more than twice their prior level, using income for the nine months through September 30 as the yardstick.

Why now

US refiners are printing record earnings as global gasoline and diesel capacity stays tight, with supply further pinched by conflict involving Iran and by Ukraine striking Russian refineries. In the same backdrop, Valero said Friday it reached a deal to purchase and bring back online a 100-year-old Houston facility to capture wider refining margins.

"In light of current favorable market conditions, we expect the acquired business to continue to generate substantial cash flows over at least the next 12 months," CVR Chief Executive Officer Dane Neumann said.

Industry transactions remind investors that smarter tools can help uncover long term opportunities. We're hosting our first ever investor livestream on 11/17 to show you how to use ChatGPT and Claude to invest like a pro, hosted by Briefs Finance CEO Jaspreet Singh. Save your seat.

Financing and deal partners

To help fund the purchase, Trafigura Group will invest $800 million in CVR shares. It is the trader's first equity stake in US oil refining and comes with potentially valuable supply rights, including an exclusive crude contract for the St. Paul Park and Mandan refineries and offtake agreements for some of those plants' petroleum products.

Beyond Trafigura's equity, CVR plans to tap $2.5 billion of secured debt along with an equity commitment of $500 million from its controlling shareholder. The parties anticipate closing by year end, pending regulatory clearance.

CVR's adviser is Barclays Plc, while Vinson & Elkins and Proskauer Rose LLP are serving as its lawyers. Debt financing is being arranged by Barclays, Wells Fargo & Co., and Mizuho. Marathon's advisers are Goldman Sachs Group as financial adviser, Moelis & Co. as strategic adviser, and Jones Day as legal counsel. For the conflicts committee of MPLX, a Marathon-controlled pipeline company, RBC Capital Markets is financial adviser and Latham & Watkins LLP is legal counsel.

What this means for your portfolio

Scale plus supply can matter more than sizzle. CVR would nearly double throughput, extend into a wider retail channel, and tie up an exclusive crude line and product offtakes with a major trader. The catch is timing and approvals, since the transaction is slated to close by year end and still needs regulatory clearance.

Watching how markets shift reinforces the value of using better tools to make decisions. On 11/17, our CEO Jaspreet Singh goes live for our first ever investor livestream on how to use ChatGPT and Claude to invest like a pro. Register to join him.