Hess Exits C-Store Business with $2.9B Sale

FINDLAY, OH—Marathon Petroleum Corp. subsidiary Speedway LLC said Thursday it would buy Hess Corp.'s retail operations in a deal valued at $2.87 billion, including $2.37 billion in cash. The deal, which incorporates all of Hess' retail locations, transport operations and shipper history on various pipelines, marks Hess' exit from the convenience-store business and grows Speedway's presence from nine states to 23.

When the deal for Hess Retail Holdings LLC closes later this year, it will nearly double Speedway's store count from about 1,480 to more than 2,700, and will position it as the largest C-store operator in the eastern US. The combined business will have 2013 pro forma revenues of more than $27 billion, 6.2 billion gallons of annual fuel sales and $4.8 billion of annual merchandise sales.

The CEOs of both companies call the pending deal transformative. “This acquisition represents an important step in our long-term strategy by accelerating Speedway's planned growth into contiguous markets and supporting the goal of generating $1 billion of EBITDA,” says Gary Heminger, Marathon's president and CEO. At New York City-based Hess, CEO John B. Hess says the sale “marks the culmination of our strategic transformation into a pure-play exploration and production company.”

Hess said in March 2013 that it would divest a number of downstream businesses, including its retail operations. It divested a number of overseas exploration and production interests, sold its East Coast and St. Lucia terminal business to Buckeye Partners LP for $850 million last October, and finalized the sale of its energy marketing business in November, with a Centrica plc subsidiary paying $1.2 billion.

This past January, Hess Retail filed a registration statement with the SEC for a possible spinoff to shareholders of the parent company. It's the largest C-store operator on the East Coast.