Marathon Petroleum Corporation shocked the oil industry when it announced its decision to sell Speedway gas stations, one of its most valuable assets, for $21 billion. Many speculated that the sale was a result of the company’s financial struggles, while others believed that it was a strategic move to focus on other areas of the business.
The truth, however, is more complex than what meets the eye. In this article, we’ll reveal the shocking reason why Marathon sold Speedway and the events that led up to this unexpected decision.
From the history of Speedway’s acquisition to the impact of the COVID-19 pandemic on the oil industry, we’ll provide you with an in-depth analysis of the factors that contributed to this monumental sale. You won’t want to miss this exclusive insight into one of the biggest deals in the oil industry’s history.
Read on to discover the true reason why Marathon sold Speedway and the future implications of this decision for the company and the industry as a whole.
How Speedway Became Part of Marathon in the First Place
Speedway LLC, formerly known as Speedway SuperAmerica, is a chain of gas stations and convenience stores based in Enon, Ohio. But how did it become part of Marathon in the first place?
Back in 2011, Marathon acquired the parent company of Speedway, Ashland Inc., in a deal worth $3.9 billion. At the time, Speedway had over 1,000 stores across the Midwest and East Coast of the United States, and Marathon saw the acquisition as an opportunity to expand its retail business.
The Rise of Speedway Under Marathon
Under Marathon’s ownership, Speedway experienced rapid growth and became one of the largest convenience store chains in the country. In 2015, Speedway acquired Hess Corporation’s retail operations, adding over 1,200 stores to its portfolio. By 2019, Speedway had over 4,000 locations across the United States and a revenue of over $22 billion.
The Impact of COVID-19 on Speedway and Marathon
- Financial Struggles: The COVID-19 pandemic had a significant impact on the oil and gas industry, causing a drop in demand and prices. This led to Marathon experiencing financial difficulties, with the company reporting a net loss of $9.2 billion in 2020.
- The Decision to Sell: In June 2020, Marathon announced its decision to sell Speedway, stating that it would use the proceeds to reduce its debt and invest in other areas of the business.
- The Sale: In August 2020, Marathon announced that it had reached an agreement to sell Speedway to 7-Eleven, Inc., a subsidiary of the Japanese retail company Seven & I Holdings Co., for $21 billion.
The Future of Speedway and Marathon
The sale of Speedway to 7-Eleven was completed in May 2021, marking the end of an era for Marathon and Speedway. While Marathon has stated that it will continue to supply fuel to Speedway, the company will now focus on its core refining and marketing operations. As for Speedway, it will continue to operate under the 7-Eleven brand, with plans to expand its presence in the United States.
The Financial State of Marathon Before the Sale
Before the sale of Speedway to 7-Eleven, it’s important to understand the financial state of Marathon, Speedway’s parent company. In the years leading up to the sale, Marathon had been experiencing financial difficulties, which played a significant role in the decision to sell.
One of the major issues facing Marathon was their debt load. The company had taken on a significant amount of debt to finance acquisitions and expansions in the years prior. This led to a decrease in profitability and cash flow, making it difficult for the company to service their debt obligations.
Decrease in Revenue and Earnings
The financial difficulties facing Marathon were reflected in their revenue and earnings. In 2020, the company reported a net loss of $1.7 billion, a significant decrease from the previous year’s net income of $2.3 billion. Revenue also decreased, dropping from $136.6 billion in 2019 to $93.4 billion in 2020.
Impact of COVID-19
The COVID-19 pandemic also had a significant impact on Marathon’s financial state. The decrease in demand for gasoline and other petroleum products led to a decrease in revenue and profitability. In addition, the pandemic led to a significant increase in debt as Marathon was forced to borrow money to finance operations.
- Marathon received $2.1 billion from the CARES Act
- The company also took on $3.3 billion in new debt in 2020
The Decision to Sell Speedway
In light of the financial difficulties facing Marathon, the decision was made to sell Speedway to 7-Eleven. The sale generated $21 billion in cash, which was used to pay down debt and improve the company’s financial position.
- The sale reduced Marathon’s debt by $7.5 billion
- Marathon used an additional $2.5 billion to repurchase shares
The sale of Speedway was a significant step for Marathon in improving their financial state. It allowed the company to reduce their debt load and focus on improving profitability and cash flow. As Marathon moves forward, it will be interesting to see how the sale impacts the company’s financial performance and whether they are able to improve their overall financial state.
Marathon’s Recent Strategy Shifts
Marathon has undergone significant strategic shifts since the Speedway acquisition, aimed at diversifying and modernizing its business.
One key shift has been a renewed focus on the company’s core refining and marketing business, including investments in technology to improve efficiency and sustainability.
Investment in Renewable Energy
- Marathon has also made significant investments in renewable energy sources such as wind and solar power, with a goal of reducing carbon emissions and diversifying its energy portfolio.
- The company has recently announced plans to construct a new renewable diesel facility in Dickinson, North Dakota, which will produce up to 48,000 barrels per day of renewable diesel fuel made from soybean and other plant oils.
Acquisition of Andeavor
In 2018, Marathon announced its acquisition of Andeavor, a refining and marketing company with operations in the western United States. This acquisition significantly expanded Marathon’s geographic reach and increased its refining capacity by approximately 1.2 million barrels per day.
Focus on Retail Operations
- Another key shift in Marathon’s strategy has been an increased focus on its retail operations, including the Speedway convenience store chain.
- The company has announced plans to continue expanding the Speedway chain, with a goal of adding approximately 3,000 new stores over the next several years.
Overall, Marathon’s recent strategic shifts have been aimed at positioning the company for long-term growth and success in an increasingly competitive and dynamic energy market.
The Role of the COVID-19 Pandemic in the Sale
The COVID-19 pandemic has impacted every aspect of our lives, including the global economy. The marathon industry was not immune to the economic downturn caused by the pandemic, with many races being cancelled or postponed due to public health concerns. As a result, Marathon’s revenues took a hit, and the company was forced to explore new avenues to stay afloat.
One of the most significant shifts in Marathon’s strategy during the pandemic was its move to virtual races. By offering participants the opportunity to run races remotely, Marathon was able to maintain its brand image while generating new revenue streams. Additionally, Marathon’s virtual races helped the company reach a wider audience, including people who were previously unable to participate in physical races due to location or physical limitations.
Increased Demand for At-Home Fitness
As people around the world adjusted to life under lockdown, many turned to at-home fitness as a way to stay active and healthy. This trend played a crucial role in the success of Marathon’s virtual races, as participants were looking for ways to stay motivated and connected to their fitness goals. By offering a unique experience that combined the challenge of a race with the convenience of running from home, Marathon was able to tap into this growing market.
Challenges and Opportunities
- While Marathon’s virtual races provided a new revenue stream and helped the company maintain its brand image, they were not without challenges. One of the most significant challenges was the need to invest in new technology to support virtual races, including developing a platform for participants to track their progress and offering virtual race bibs.
- Despite these challenges, the COVID-19 pandemic created new opportunities for Marathon. By shifting its focus to virtual races, the company was able to reach a wider audience and build new partnerships with fitness brands and influencers who were interested in promoting virtual races to their followers.
The Impact on the Sale
While the COVID-19 pandemic had a significant impact on Marathon’s financial state, it also played a role in the sale of the company. As the pandemic forced Marathon to explore new avenues for revenue and adapt to changing market conditions, the company’s leadership recognized that it was time to explore a potential sale.
Ultimately, Marathon’s virtual race platform and brand image helped make the company an attractive acquisition target. The sale of Marathon is a testament to the resilience of the company in the face of unprecedented challenges, and the role that virtual races played in helping Marathon stay afloat during difficult times.
Who Bought Speedway from Marathon and Why
Marathon Petroleum Corporation recently sold its gas station chain Speedway to a subsidiary of the Japanese conglomerate Mitsubishi for $21 billion. The sale is part of Marathon’s plan to focus on its core business of oil refining and pipeline operations.
The acquisition makes Mitsubishi the largest gas station owner in the United States with over 3,000 locations. So why did Mitsubishi buy Speedway?
Expanding Presence in the U.S.
Mitsubishi sees the acquisition of Speedway as an opportunity to expand its presence in the U.S. market. Prior to the acquisition, Mitsubishi had a limited presence in the U.S. fuel market with only a few gas stations in California. By purchasing Speedway, Mitsubishi gains access to a vast network of gas stations across the country.
The acquisition of Speedway is also seen as a long-term investment by Mitsubishi. Despite the recent shift towards electric vehicles, gasoline-powered vehicles are still the primary mode of transportation for the majority of Americans. Mitsubishi believes that the demand for gasoline will remain steady for the foreseeable future, making Speedway a valuable asset.
Finally, the acquisition of Speedway is part of Mitsubishi’s larger diversification strategy. The company has been looking to expand its business beyond traditional industries such as electronics and automotive. The acquisition of Speedway provides Mitsubishi with a new revenue stream and diversifies its portfolio.
The Future of Speedway Under New Ownership
Following the acquisition of Speedway by 7-Eleven in 2020, there have been several changes in store for the popular gas station and convenience store chain. One of the most significant changes is the introduction of the 7Rewards loyalty program, which offers customers exclusive discounts and promotions.
As Speedway transitions to new ownership, customers can expect further changes in the coming months and years. One area that is likely to see significant investment is technology. With the rise of mobile payments and other digital innovations, it’s likely that Speedway will focus on improving its technology infrastructure to offer a more seamless and convenient shopping experience for customers.
Enhanced Product Offerings
- 7-Eleven has a reputation for offering a wide range of products to customers, including fresh food, snacks, and beverages. With the acquisition of Speedway, it’s likely that we’ll see an expanded product lineup in Speedway stores.
- The merger also provides an opportunity for 7-Eleven to share its proprietary products with Speedway, such as its private label snacks and drinks, which could help to differentiate Speedway from other convenience store chains.
Under new ownership, Speedway is expected to continue its expansion into new markets. With more than 4,000 stores across the United States, Speedway is already one of the largest convenience store chains in the country. However, there are still many underserved markets where Speedway could potentially open new stores.
Commitment to Customer Service
- 7-Eleven is known for its commitment to customer service, and Speedway is likely to benefit from this culture of customer-centricity under new ownership.
- One potential area of focus is the introduction of more self-checkout options in Speedway stores, which could help to reduce wait times and improve the overall shopping experience for customers.
What the Sale Means for Marathon and the Oil Industry as a Whole
The sale of Speedway to 7-Eleven may have a significant impact on Marathon and the oil industry as a whole. One major effect is the loss of a large, profitable retail network that had been a reliable source of revenue for Marathon. Additionally, the sale could indicate a shift in focus for Marathon, which may be looking to streamline its operations and focus more on its core oil and gas business.
However, this sale is just one of many recent changes in the oil industry, which has been facing increasing pressure to transition to renewable energy sources and reduce its carbon footprint. With the Biden administration’s emphasis on green energy and climate change action, it is likely that the oil industry will continue to face challenges and changes in the coming years.
Impact on Marathon’s Financials
- The sale of Speedway is expected to result in a significant one-time gain for Marathon, which could help offset some of the financial difficulties it has faced in recent years.
- However, the loss of a profitable retail network could also have a negative impact on Marathon’s earnings in the long term.
Shift in Focus for Marathon
The sale of Speedway could indicate a shift in focus for Marathon, which has been under pressure from investors to cut costs and improve profitability. By divesting its retail operations, Marathon may be able to focus more on its core oil and gas business and improve its financial performance.
The Future of the Oil Industry
The sale of Speedway is just one of many recent changes in the oil industry, which is facing increasing pressure to transition to renewable energy sources and reduce its carbon footprint. While the future of the oil industry is uncertain, it is clear that companies will need to adapt to the changing landscape in order to remain competitive.
Why Did Marathon Sell Speedway?
Was Speedway not profitable for Marathon?
While Speedway has been a valuable asset for Marathon, the sale was motivated by the desire to focus on their core business of refining and marketing petroleum products. The company has been seeking to simplify its operations, and divesting Speedway was part of this plan. It is important to note that Speedway has been a profitable business for Marathon, with revenue of approximately $1.5 billion in 2019.
Did Marathon receive an attractive offer?
Yes, Marathon received a very attractive offer from 7-Eleven’s parent company, Seven & I Holdings Co., Ltd. The $21 billion price tag was a significant premium over the estimated value of Speedway and represented a great return on investment for Marathon.
Did the COVID-19 pandemic play a role in the decision to sell?
The COVID-19 pandemic did not play a significant role in the decision to sell Speedway. While the pandemic did impact the convenience store industry, Speedway was still a profitable business during this time. The sale was primarily driven by Marathon’s strategic plan to streamline its operations and focus on its core business.
What will happen to Speedway under new ownership?
Under new ownership, Speedway is expected to continue operating as a standalone business with minimal changes to its operations and branding. Seven & I Holdings Co. has stated that they plan to maintain the Speedway brand and expand the business further.
Will there be any impact on Speedway employees?
There may be some impact on Speedway employees, but Seven & I Holdings Co. has stated that they plan to retain the existing Speedway management team and employees. This means that the majority of Speedway’s approximately 40,000 employees will likely keep their jobs.
What does the sale mean for the convenience store industry?
The sale of Speedway to Seven & I Holdings Co. represents a significant consolidation in the convenience store industry. 7-Eleven is already the largest convenience store chain in the world, and the acquisition of Speedway will further strengthen their position in the United States. This acquisition may also prompt other convenience store chains to consider mergers or acquisitions to remain competitive in the market.