Too Ambitious?

(Disclaimer - I've been TAP'd)

I wonder what Gary H thinks now about his ill-fated decision to merge with Andeavor. Was he trying to keep Elliott Mgmt away? Did he really think it was wise to buy ten more refineries and get involved in the CA/West Coast market? If he was trying to expand Speedway, he certainly could have gone another way to be 'Coast to Coast'.

Whatever he was thinking, he was ill-prepared to get the merge done quickly. In the oil business, the buyer sets the tone and eliminates the waste and redundancies...usually in 6 to 12 months. Instead, we split up divisions and each organization kept their groups safely employed while trying to come up with 'lofty' synergy savings that makes Wall Street laugh. From my vantage point, I watched Legal create more contracts for every single refinery and division instead streamline service agreements. SAP/Project Unify was a two-year plan...which in today's world of technology, that is like taking 20 years to make improvements. A TAR group was started that created more red tape, more spreadsheets, week-long visits at each location to go over 'action items' and yielded little if any savings due to non-value added paperwork & large travel budgets.

Now Hennigan is set loose to redesign the company with the help of (extremely costly) consultants. In two years since the 'merger', not one person called to ask for ideas nor were any suggestions presented even looked at. Instead, mgmt acted with its head in the sand and waited to be told what to do by above.

So the first wave is done and everyone is acting like they are safe. Far from it. The process to make MPC leaner has only just begun. I read people blaming COVID but there's always an event to trigger such economic hardships. We had a whole year to get leaner but nothing was done in 2019 - a missed opportunity. But now, with 10-15% of refining capacity off the US market, MPC will be primed to make some serious cash from 2021 and forward. Once we get past the 'election infection', the economy is primed to take off. That's great news for my MPC stock - why else is Elliott here?

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What do you think now? Not just from the acquisition, but the payoff of Project Unify. Quarterly earnings began soaring 2 years ago - by an order of magnitude no less - and the stock price has increased to over $190 with quarterly dividends of $.825/share. Looks like it was a genius acquisition - that notably appeared ill timed due to COVID - and that Project Unify has helped to greatly increase margins (not from the SAP side, but from the CTRM and data warehouse side).

Before the merger around 2014 Gary H stated in a townhall speech at my plant that losing St. Paul was the only move he has ever regretted up until that point. I think he bought Andeavor later just to "right" that "wrong".

I don't think he really planned to buy and hold all the other Andeavor plants, maybe sell them off slowly. But the markets turned and no one was buying. In trying to go out "big"... he made an even bigger mess.

Harvard Business Review states that 70-90% of all acquisitions and mergers fail. I have been in companies in the midst of mergers, and they were always horrible and usually caused great peril to the purchasing company. The actual "cost" to merge to individual organizations from people/culture, technology, and operating procedures is huge. The cost savings does not happen initially... many investors aren't willing to wait this process out. It may be the end of MPC.

That’s strange Markwest is the only one in the black

I feel it was all my fault

I’ll add that the clueless, ego-driven, MPC leadership is at fault for what you are seeing today.

During the acquisition, the best and brightest at Andeavor saw what a poorly run company MPC really was, and gladly accepted (or actively pursued) the severance package (at an all time high stock price!). Leadership was too detached/inept to see this happening. Most of the ANDV leaders left behind and retained by MPC were actually the “B” and “C” team players that didn’t have better options outside. MPC not only shot themselves in the foot in an overpriced acquisition, but retained the wrong people!

As noted in another thread, the 'integration' with ANDV was very poorly done and will likely be a great b-school case study of how not to do an acquisition – a great legacy for GH. Almost the entire leadership team of the combined entity was/is heritage MPC; 20+ yrs with the same company and heavily driven by group-think (I can recall meetings where the 'officers' would virtually complete each other's sentences). Contrast to ANDV where GG had built a team from different companies & cultures that was dynamic and forward looking. No wonder MPC continuously trails P66 and VLO. IMO, MPC will continue to be a 3rd tier player in an industry that will be going though a tremendous amount of change and restructuring over the coming decade – and with the group-think, F'ly based leadership likely to continue to be a laggard.

Gary H is an id–t who always overpaid for acquisitions and Wall Street was well aware of that, which is why the investors and Elliott fired him.

Markwest? Awful. Hess? Nobody wanted that c-ap and he made it the most expensive gas station merger.

Andeavor? Too big to chew and might bankrupt the company in the end. MPC not making money so they keep

Half of MPC refineries didn’t make money prior to covid (Hello, Canton!!), there’s no magical savior in 2021 with jet and gasoline demand loss.

Thread regarding Marathon Petroleum layoffs

Too Ambitious?

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