Marathon to Buy Ashland Stake for $1.1Bln

NEW YORK March 19, 2004; Joseph A. Giannone writing for Reuters reported that Marathon Oil Corp.said it would buy Ashland Inc.'s 38 percent stake in their refining and marketing joint venture, Marathon Ashland Petroleum LLC, for $1.1 billion in cash and stock.

Houston-based Marathon, which will also assume $1.9 billion of debt as part of the deal, said it would soon make a public offering of $1 billion of common stock to help fund the acquisition.

It said the stock offering and the acquisition will reduce its earnings per share in 2004, but full ownership of Marathon Ashland Petroleum, or MAP, is expected to boost profit and cash flow starting in 2005.

Marathon described MAP as one of the best-performing companies in the refining industry. Findlay, Ohio-based MAP is the No. 5 U.S. refiner, operating seven refineries with total production capacity of 948,000 barrels of oil a day. It also owns or leases more than 8,000 miles of pipeline and retails fuels through 6,000 outlets doing business under the Marathon, Speedway, Super America and Pilot Travel Center brands.

In the acquisition, Marathon said it would pay $315 million in common stock and about $794 million in cash and accounts receivable from MAP. It will also assume $1.9 billion of debt and environmental liabilities with a present value of $15 million.

As part of the deal, Marathon said it will purchase two complementary Ashland businesses for about $94 million: 61 Valvoline Oil Change centers in Michigan and Ohio, and an operation that produces a chemical used in pharmaceuticals, dyes and resins.

Marathon said the MAP transaction, expected to close in the fourth quarter, will depend on the U.S. Internal Revenue Service declaring the deal tax-free. Approval by Ashland stock and bond holders is also required.

ASHLAND OUTLOOK

Covington, Kentucky-based Ashland, which produces and distributes chemicals and operates one of the largest highway paving and construction businesses in the U.S., said it would not receive MAP cash distributions between now and the completion of the deal.

As a result, the final amount received by Ashland in the deal will be increased by an amount equal to 38 percent of the cash accumulated from MAP operations during that period.

Separately, Ashland said its construction and chemicals businesses continue to see improved performance in the current quarter. Ashland Paving and Construction expects its quarterly loss to narrow to between $30 million and $40 million, from a year-earlier loss of $57 million.

Operating income from chemicals is expected to jump to between $50 million and $55 million, up from $30 million a year earlier, it said.