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New CEO for Marathon After Hedge Fund Campaign

October 31, 2019

Marathon Petroleum Corp chief Gary Heminger will leave the company next year after almost a decade in charge, launching sweeping changes demanded by investors at the biggest U.S. refiner including the spinoff of its Speedway retail arm.

The departure is a victory for activists Elliott Management, DE Shaw and others who had sought the changes following the 2018 acquisition of rival Andeavor.

That $23 billion deal gave Marathon a coast-to-coast refining network but delivered results that disappointed and its shares fell to a two-year low this year.

Marathon said Chief Executive Officer Heminger would retire next year when his current term ends. He has worked for Marathon since the mid-1970s and has been at the helm since 2011.

Billionaire Paul Singer's Elliott, which owned 0.7% of Marathon as of June 30, according to Refinitiv data, has argued a three-way split of the company would boost shareholder value by as much as $40 billion.

As well as spinning off the gas station business Speedway, Marathon said it was launching a review of its midstream pipeline operations. Speedway will trade as an independent public company after the separation is completed.

Elliott said it was supportive of Marathon's actions announced on Thursday, saying it expected these measures would unlock substantial value for shareholders.

Former Andeavor board members Paul Foster and Jeff Stevens, who together own about 1.7% of Marathon, had also backed the hedge fund's proposals and called for Heminger's immediate removal.

Separately, Marathon beat analysts' estimates for quarterly profit on Thursday, benefiting from transporting higher volumes of crude and natural gas across its pipelines.

Excluding items, the company reported an adjusted profit of $1.63 per share, compared to analysts' average estimates of $1.38 per share, according to IBES data from Refinitiv.

Net income attributable to the company rose 48.6% to $1.10 billion, or $1.67 per share, in the third quarter ended Sept. 30.

Total revenue and other income rose to $31.20 billion from $23.13 billion.

Till a day before Elliott made its call for changes on Sept. 25, Marathon's shares were down about 6% this year. Shares were up about 12% for the year through Wednesday's close.

Reporting by Shradha Singh

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