(Reuters) – Marathon Petroleum Corp said on Friday the top U.S. refiner’s board supported Gary Heminger staying on as chief executive officer amid calls for his ouster from two top 10 shareholders.
FILE PHOTO: A Marathon Petroleum banner covers an Andeavor sign outside the El Paso refinery following a closed $23 billion deal after the Ohio-based Marathon bought the Texas-based company, forming one of the largest global refiners in El Paso, Texas, U.S., October 1, 2018. REUTERS/Julio-Cesar Chavez
The demand from shareholders Paul Foster and Jeff Stevens comes when Marathon is already under pressure after activist investor Elliott Management Corp revived its call for the company to be split into three.
Foster and Stevens, who together own about 1.7% of Marathon, agreed with “the majority” of Elliott’s proposals, but said an immediate management change was necessary to boost shareholder value. (bwnews.pr/2lFV9ck)
Billionaire Paul Singer’s Elliott, which owned 0.7% of Marathon as of June 30, according to Refinitiv data, has argued a split would boost shareholder value by as much as $40 billion.
Marathon said the board firmly and unanimously supported Heminger, who has been the chairman and chief executive officer since the company separated from Marathon Oil Corp in 2011.
In a separate letter to employees on Friday, Heminger defended Marathon’s business model. (bit.ly/2mlFSh1)
The CEO said Marathon has generated more cost savings than initially expected from its $23 billion merger with rival Andeavor last year to become the top U.S. refiner by capacity. Additionally, Heminger said he was open to meeting with shareholders, responding to the claim of Foster and Stevens that he had resisted change.
Heminger’s membership of the board is due up for shareholder vote in 2020, according to Marathon’s 2019 proxy statement. Shareholders had at the 2018 annual meeting rejected a proposal for an independent chairman.
Elliott said its call to separate Marathon’s retail, refining and midstream assets was prompted by the company’s failure to deliver on past promises and “chronic underperformance.”
The statement from Foster and Stevens, both former board members at Andeavor, is the second example in recent months of executives from energy companies merged into a rival returning to voice concern over performance following the combination.
Toby and Derek Rice led a successful proxy contest in July to gain control of EQT Corp, two years after selling the business they founded, Rice Energy, to EQT for $6.7 billion.
Another Marathon shareholder, DE Shaw & Co, has backed Elliott’s call to split the company. DE Shaw has a 0.9% stake in Marathon, according to Refinitiv data.
Marathon’s shares were trading 2.5% lower at %62.38 on Friday. They have fallen about 6% this year, compared with a 7.4% gain in the S&P oil and gas refining and marketing index. At the year’s low of $43.96 in August, its shares touched 2016 levels.
Marathon is the largest refiner by operating capacity, and the second-largest refiner by market capitalization, lagging Phillips 66, which also operates chemical plants.
Reporting by Aakriti Bhalla, Rebekah Mathew and Shanti S Nair in Bengaluru and Jessica Resnick-Ault and David French in New York; Editing by Marguerita Choy and Sriraj Kalluvila