DENVER, Dec. 19, 2017 /PRNewswire/ -- John M. Fox
today released the following open letter to the board of directors
of MPLX responding to Marathon Petroleum Corporation's announcement
to demand over $10 billion for its GP
economic interest in MPLX.
The full text of the letter follows:
December 19, 2017
Board of Directors
MPLX LP
200 East Hardin Street
FINDLAY, OH 45840-3229
Attention: The Board of Directors of MPLX GP
Dear Gary,
As you have seen from my letter to you and the MPC board
yesterday the price contemplated for MPLX's purchase of MPC's IDRs
(incentive Distribution Rights) is extraordinarily excessive.
As Chairman of MPLX's General Partner it is incumbent on you to
ensure that the Conflicts Committee reviewing and approving the
proposed IDR take-out transaction act in good faith and
"subjectively believe that the determination . . . is not
adverse to the best interests of the Partnership Group". The
words in quotes are from the Third Amended and Restated Agreement
of Limited Partnership of MPLX LP dated as of October 31, 2016 (as amended) and it appears to
me that the proposed transaction value is adverse to the best
interests of the Partnership Group in that the Partnership Group is
paying an unjustified price to eliminate the GP IDR interest,
diluting all unitholders. Moreover, I believe the price
agreed to by MPLX would not be one agreed to by truly
independent directors.
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, 2017, any 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.
MPLX is being asked to pay for the MPC IDRs with 275,000,000 new
units which is equivalent to 17 times the value of the IDRs being
purchased. With approximately 800,000,000 outstanding
units following the issuance of these new units, I estimate pro
forma distributions will equate to $2.40 per unit. However, without the IDR
elimination, I estimate you would be distributing $2.50 - $2.55 per
unit. How, then, can the IDR elimination be considered
accretive to MPLX as you indicate in your press release?
By MPC 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 and MPLX's desire
to purchase the IDR burden, but it must be done at a multiple
which will actually create long-term value for MPLX and its
unitholders, MPC included. I urge MPLX to reconsider the
inflated multiple it is paying for the IDRs so that it do not lose
an opportunity to create real value for its unit holders.
It is not too late to do the right thing!
Sincerely,
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.
Disclosure:
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 19, 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
www.itjustmakessensegary.com.
Contact:
John Fox
Johnfox@itjustmakessensegary.com
720-213-6439
www.itjustmakessensegary.com
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SOURCE John M. Fox