In a significant reshaping of the energy sector, Marathon Oil Corporation (NYSE:MRO) has finalized its merger with ConocoPhillips (NYSE:NYSE:COP), as detailed in an 8-K filing with the Securities and Exchange Commission. The transaction, which was initially announced on May 28, 2024, was completed today, with Marathon Oil becoming a wholly owned subsidiary of ConocoPhillips.
As part of the merger agreement, each share of Marathon Oil common stock has been converted into the right to receive 0.2550 shares of ConocoPhillips common stock, along with cash in lieu of fractional shares. This conversion affects all Marathon Oil shares except for certain excluded and converted shares as defined in the merger agreement.
In conjunction with the merger's completion, Marathon Oil has terminated its existing credit agreement and paid off all associated obligations. This agreement, dated May 28, 2014, included commitments for letters of credit and was with various lenders and JPMorgan Chase (NYSE:JPM) Bank, N.A. as the administrative agent.
The merger has also led to the delisting of Marathon Oil's common stock from the New York Stock Exchange (NYSE), with the company requesting the suspension of trading and the filing of a Form 25 to delist and deregister the stock under Section 12(b) of the Securities Exchange Act of 1934. This will be effective 10 days post the Form 25 filing, followed by a Form 15 filing to request the termination of registration of Marathon Oil's common stock under Section 12(g) of the Exchange Act and the suspension of reporting obligations.
Furthermore, all outstanding equity awards of Marathon Oil have been adjusted in line with the merger terms. Restricted stock units and performance unit awards have been converted to ConocoPhillips stock units or cash, depending on the type of award and the conditions set out in the merger agreement.
The merger has resulted in a change of control, with ConocoPhillips becoming the new parent company. This change has led to the departure of all directors and certain officers from Marathon Oil, as their positions were terminated at the effective time of the merger.
In other recent news, Marathon Oil has been under the lens of RBC Capital, which maintains an Outperform rating on the company, with a price target of $34.00. The firm's analysis indicates that the upcoming quarterly earnings may not include a conference call or a detailed update, similar to the previous quarter. RBC Capital's outlook for Marathon Oil extends to 2026, assuming a steady state for the company without shareholder returns, in line with the merger agreement terms with ConocoPhillips. The acquisition of Marathon Oil by ConocoPhillips is anticipated to be finalized by the end of 2024, pending approval from the Federal Trade Commission.
In other developments, the companies are progressing with their merger plans and have provided additional information to address alleged deficiencies in the original merger disclosure. The merger could result in Marathon becoming a wholly-owned subsidiary of ConocoPhillips, subject to Marathon's shareholders' approval. Amid ongoing litigation, Marathon has updated details about financial analyses and potential employment arrangements post-merger.
On the earnings front, Marathon Oil's earnings estimates for the second quarter missed expectations, leading to a downgrade by JPMorgan from Overweight to Neutral and by Scotiabank (TSX:BNS) from Sector Outperform to Sector Perform. The company declared an 11-cent per share dividend on its common stock and agreed to pay $64.5 million to settle alleged Clean Air Act violations. These are the recent developments that are shaping the course of Marathon Oil.
InvestingPro Insights
As Marathon Oil Corporation (NYSE:MRO) merges with ConocoPhillips, it's worth noting some key financial metrics and insights from InvestingPro. Prior to the merger, Marathon Oil had a market capitalization of $15.97 billion and was trading at a P/E ratio of 12.31, indicating a relatively modest valuation compared to some industry peers.
InvestingPro Tips highlight that Marathon Oil had maintained dividend payments for an impressive 54 consecutive years, demonstrating a strong commitment to shareholder returns. This track record of consistent dividends could be an attractive feature for ConocoPhillips as it integrates Marathon Oil's assets and operations.
Additionally, Marathon Oil's stock was trading near its 52-week high before the merger, with a price-to-book ratio of 1.4, suggesting that the market valued the company's assets favorably. This could indicate that ConocoPhillips saw significant value in acquiring Marathon Oil at this juncture.
For investors interested in more comprehensive analysis, InvestingPro offers additional tips and insights that could provide further context to this merger and its implications for the energy sector.
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