CVR Energy has agreed to buy Marathon Petroleum-affiliated refining, marketing and logistics assets for a base cash price of $4.2 billion, expanding its refining operations with two refineries in Minnesota and North Dakota. The transaction also includes minority stakes in a pipeline company and its investment affiliate, as well as related transportation, storage and distribution assets.
The deal remains subject to regulatory and other closing conditions. CVR would also take on specified liabilities tied to the acquired assets, including environmental liabilities, while Marathon’s sellers would retain certain excluded obligations.
Key details
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Assets being acquired: CVR will acquire all of St. Paul Park Refining Co., which owns the St. Paul Park refinery in Minnesota, and certain assets associated with the Mandan refinery in North Dakota, including its related marketing business and terminal, pipeline, rack, tankage and other logistics assets.
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Pipeline interests: The purchase includes 17% of the common interests in Minnesota Pipe Line Company and 17% of the common stock of MPL Investments.
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Price and adjustments: The base purchase price is $4.2 billion in cash. The amount is subject to customary closing adjustments, including for net working capital, and other specified adjustments. CVR will also assume certain liabilities related to the assets; the agreement does not state a value for those liabilities.
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Environmental exposure: CVR’s assumed liabilities include environmental liabilities arising before, at or after closing, except for obligations specifically retained by the sellers.
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Funding and liquidity: The deal has no financing condition, so failure to secure financing does not automatically give CVR the right to walk away. CVR must use reasonable best efforts to arrange financing, including alternative financing in specified circumstances, and the sellers must provide customary cooperation. CVR has also committed to maintain at least $500 million of unrestricted cash and cash equivalents through closing. That amount can rise by up to a further $500 million if CVR completes an equity offering and deposits the proceeds.
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Regulatory and other closing conditions: The transaction requires antitrust approvals and the expiration or termination of applicable waiting periods. CVR must also receive written approval, non-objection or authorization from North Dakota’s environmental regulator for the transfer of the Mandan refinery’s hazardous-waste permit. Other conditions include the absence of legal prohibitions or specified challenges, and each side’s compliance with its contractual obligations.
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Limits on required remedies: CVR is not required to accept a specified “burdensome condition” to obtain antitrust approval. The agreement specifically says CVR cannot be required to sell either acquired refinery or its existing Coffeyville or Wynnewood refinery.
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Timing: The agreement allows 270 days from signing for the transaction to close, with extensions to as late as 360 days in certain circumstances involving antitrust approvals or restoration after casualty damage.
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Termination fees: If the deal fails to close in specified circumstances, CVR could owe the sellers a fee of $84 million for failure of antitrust conditions by the applicable deadline, including after CVR rejects a burdensome condition; $252 million for a willful breach or a qualifying failure to close because financing is not obtained or funded; or $168 million for other specified failures to close. These fees are not cumulative. The sellers could owe CVR a fee of $210 million for a willful breach or $168 million for other specified failures to close.
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Damage to assets before closing: For certain casualty or condemnation losses, the sellers may elect to repair or restore the affected assets, reduce the purchase price, or assign related insurance or condemnation proceeds to CVR. Restoration could delay closing. The agreement does not give either side a termination right solely because of such a loss.
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Risk allocation: The sellers’ representations, warranties and pre-closing covenants generally do not continue after closing, and CVR generally will not have post-closing indemnification rights for breaches of them, subject to exceptions such as fraud. CVR has arranged representation-and-warranty insurance, subject to policy limits, exclusions and other terms. The parties also agreed to indemnify each other for certain specified liabilities and contractual breaches.
Plain-English implications
If completed, the acquisition would give CVR ownership of the St. Paul Park refinery and the Mandan refinery assets, along with associated marketing and logistics operations. The transaction is structured as a cash purchase, with CVR taking on specified asset-related liabilities, including environmental obligations. It cannot close without antitrust clearance and approval or other written authorization for the transfer of Mandan’s hazardous-waste permit.