Marathon Petroleum’s board and investors are said to discuss the CEO’s future

By Scott Deveau, David Wethe and Catherine Ngai on 10/17/2019

NEW YORK (Bloomberg) - Marathon Petroleum board members are meeting this week with activist investors to discuss chief executive officer Gary Heminger’s future and the company’s strategy amid calls to split up its businesses, according to people familiar with the matter.

After investors Paul Foster and Jeff Stevens met with several board members on Wednesday, representatives for Elliott Management Corp. and D.E. Shaw & Co. plan to meet with directors Thursday, according to the people, who asked not to be identified because the meeting wasn’t public. Foster and Stevens together control about 1.7% of the second-biggest U.S. refiner.

Marathon is aiming to make a decision on the CEO and its strategy going forward by the time of the company’s third-quarter earnings call on Oct. 31, the people said. The activists view Executive Vice Chairman Greg Goff, who joined Marathon after its purchase of Andeavor, as a well-respected potential replacement for Heminger, according to the people. Representatives for Elliott, D.E. Shaw, Foster and Stevens declined to comment.

“Marathon has delivered substantial shareholder value under the leadership of Chairman and CEO Gary Heminger, who has the full support of the board,” Marathon said in a statement. “As we have said publicly, the company is conducting a comprehensive strategic review, and has been collecting feedback from many shareholders as is our practice. The review is ongoing and no conclusions have been reached.”

Marathon shares rose 3.5% to $64.85 at 11:20 a.m. in New York after earlier climbing as much as 4.3%.

Last month Elliott, which recently took a 2.5% stake in Marathon, renewed its push for Marathon to split into three separate companies in order to unlock more than $22 billion in value. Foster and Stevens released a letter days later demanding Heminger’s ouster. D.E. Shaw, which owned a 0.9% stake as of the end of June, has also been pushing Marathon to find ways to unlock more value, according to people familiar with the matter.

In their meeting this week, Stevens and Foster told board members that they’re hearing significant support among shareholders for Heminger to step down and agreement with Elliott’s plan to break up the company, according to one of the people. But board members responded that shareholders have told Marathon’s investor relations team that they don’t object to Heminger staying on as CEO, the person said.

Heminger -- who was given an exemption from the company’s age-65 mandatory retirement rule in July 2018 -- took charge of the Findlay, Ohio-based company when Marathon Oil Corp. spun off the business in 2011 and has been fighting activist shareholders ever since. While the Ohio native has previously assuaged investors including Jana Partners LLC and overseen a five-fold rise in dividend payouts, the company has faltered more recently as it sought to expand through acquisitions, including the purchase of rival Andeavor.

Heminger appeared with Goff in a video posted to YouTube two weeks ago, with the CEO saying he welcomes feedback from shareholders.

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