Marathon Petroleum (NYSE: MPC) said on Monday it would buy rival Andeavor (NYSE: ANDV) for more than $23 billion, forming a company that would leapfrog Valero Energy as the largest independent U.S. refiner by capacity.
Shale oil fields have pushed U.S. crude production to record highs and industry experts argue operations that have capacity to refine light crude like Andeavor will be better positioned to take advantage of the boom.
Andeavor also runs refineries in Alaska, California, Minnesota, New Mexico, North Dakota, Texas, Utah, and Washington which should complement Marathon's largely Mid-West and Gulf Coast-based operations.
The cash-and-stock deal values Andeavor, formerly known as Tesoro, at about $152 per share, a premium of about 24% to closing prices on Friday, driving shares up $17.41, or 14.2%, by midday Monday to $139.93.
Marathon's board also approved an additional $5 billion share buyback, but its shares were just over 1% lower.
Including Andeavor's debt, Marathon is paying $35.6 billion to hold 66% of a combined company which will have the ability to process about 3.1 million barrels per day along with a large network of filling stations and oil and natural gas pipelines.
Marathon Chief Executive Gary Heminger, who oversaw a 20% rise in net profit in the first quarter, will run the combined company, with a senior role for Andeavor's chief executive, Gregory Goff.
"Each of our operating segments (is) strengthened through this transaction," Heminger said in a statement.
Shares in Marathon gained five cents to $18.17 approaching noon ET on Monday.
