John Fox, Co-Founder Of MarkWest Hydrocarbon, Issues Response To The Board Of Directors Of Marathon Petroleum Corporation Concerning Unprecedented IDR Elimination Valuation

DENVERDec. 18, 2017 /PRNewswire/ — John M. Fox today released the following open letter to the board of directors of Marathon Petroleum Corporation (MPC) responding to management’s announcement to demand over $10 billion for its GP economic interest in MPLX.

The full text of the letter follows:

December 18, 2017

Board of Directors
Marathon Petroleum Corporation
539 S Main St
FINDLAY, OH 45840-3229

Attention: Gary Heminger, Chairman, President and Chief Executive Officer

To the Board of Directors of Marathon Petroleum Corporation:

I was frustrated to see Marathon Petroleum Corporation’s Board of Directors continues to push an unjustified inflated price for its Incentive Distribution Right (IDR) burden on MPLX.  Therefore, I sincerely hope your press release dated December 15, 2017 does not represent the final deal terms. As I outlined in my letter to you on December 5, 2017any multiple in excess of 14x is both well above the precedent set by the market, and will destroy value for both MPLX and MPC. With a 4.8% single-day decline in the value of MPLX units after your announcement of the transaction, it is clear that investors are voting with their feet.

Based on the volume-weighted average price of MPLX over the past 10 days which MPC’s management is using to value the newly issued MPLX common (LP) units, the IDR elimination will be executed at a multiple of 17x the pro forma value of the GP’s IDRs. Given expectations of available Distributable Cashflow to the LP for 2018 of $1.9 billion and approximately 796 million outstanding units following the issuance of your 275 million new units as part of the elimination, pro forma distributions will equate to $2.40 per unit.  However, if you didn’t do the IDR elimination, I estimate you would be distributing $2.50 – $2.55 per unit.  How, then, can the IDR elimination be considered accretive as you indicate in your press release?

Over the past 13 days since my last letter, I have had an overwhelming response from many large institutional holders of MPC and MPLX that share my concern over the valuation.  Your more than $10 billion valuation announced on Friday is destructive not only to MPLX but also to MPC who would own two thirds of MPLX if this gets done on these terms!

Gary, you and others have emphasized that a significant part of your effort to create value for MPC shareholders is to enhance the value of your ownership of MPLX where MPC is the largest unit holder.  Yet by insisting on a value-destroying multiple from MPLX you are in effect shooting MPLX in the foot!

By insisting on 275,000,000 units of MPLX rather than a more justifiable number of 215,000,000 units you, in effect, cripple MPLX and its value creating potential for MPC.  Where is the logic in doing that?

I support MPC’s decision to eliminate the IDRs, but it must be done at a multiple which will actually create long-term value for MPLX and its unitholders, MPC included. I urge you to reconsider the inflated multiple you have set to this deal so that you do not lose an opportunity to create real value for MPLX.

It is not too late to do the right thing!


John Fox

About John M. Fox

John Fox is the co-founder of MarkWest Hydrocarbon, former CEO, Chairman and Director of MarkWest Energy GP, L.L.C. (“MarkWest GP”), which was the general partner of MarkWest Energy Partners, L.P. (“MarkWest”), and beneficial owner of 1,544,172 MPLX common units, and 20,900 shares of Marathon Petroleum Company, through its merger with MarkWest in 2015 and from follow-on investments. Mr. Fox worked to eliminate the Incentive Distribution Rights (IDRs) at MarkWest in 2007, creating tremendous value that ultimately led to the successful acquisition of MWE by MPLX in 2015. MarkWest generated a 143.3% total return and grew from a $1.2 billion market cap to an $8.6 billion market cap for the period of September 5, 2007, when the IDRs were eliminated, to December 4, 2015.


John Fox is providing this material for general informational purposes only.  None of the information provided herein is intended to be relied upon as investment advice. The opinions expressed in this letter are those of Mr. Fox as of December 18, 2017 and are subject to change at any time due to changes in market, economic conditions, or new public information. These opinions are Mr. Fox’s alone, and do not reflect the opinions of any other member of the Fox family.  The information and opinions contained in this material are derived from proprietary and non-proprietary sources deemed by Mr. Fox to be reliable and are not necessarily all-inclusive. Mr. Fox does not guarantee the accuracy or completeness of this information. There is no guarantee that any forecasts made by any party will come to pass. Reliance upon information in this material is at the sole discretion of the reader.

More information can be found at


John Fox

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