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The pipeline unit of refiner Marathon Petroleum Corp. plans to buy MarkWest Energy Partners LP for about $15.8 billion in stock and cash, the latest example of consolidation among companies that move and process fuel. Marathon rose to the highest since it debuted in 2011.

The $15.8 billion transaction represents a major expansion for Marathon, which created its pipeline unit MPLX LP in 2012, the year after it was spun out of producer Marathon Oil Corp. The refiner has more than doubled in value since then as processors reap the rewards from low crude prices brought on by the shale revolution.

The acquisition will be a “unit-for-unit” tax-free deal that includes a one-time cash payment to MarkWest unitholders, MPLX said in a statement Monday. The combination creates a $21 billion company that will be the nation’s fourth-largest master-limited partnership. It will have shipping and processing capabilities for crude oil, refined products and gas from Texas to Pennsylvania, and will provide cheaper materials for Marathon’s refineries.

“The combination of the two companies is very formidable because it gives them economies of scale,” Fadel Gheit, a New York-based analyst for Oppenheimer & Co., said Monday. “Most of the gain is going to be for Marathon Petroleum. It will give them tremendous flexibility in their ability to source feedstock for their refining system.”

Marathon will retain control of the combined entity through ownership of the MPLX general partner and would own 19 percent of the partnership, according to the statement. The MPLX partnership structure distributes cash flow to investors and doesn’t pay corporate income tax.

MPLX affirmed plans to raise its investor payout 29 percent this year, and forecast 25 percent annual compound growth in distributions through 2017 from the combined MPLX.

Merger Interest

Marathon gained 7.9 percent on Monday to $58.78 in New York. MarkWest rose 14 percent to $68.09, while MPLX fell 15 percent to $59.03.

The deal shows that interest in mergers continues to be strong for owners of pipelines and processing units even after oil prices fell more than 50 percent since last year. Pipeline operator Williams Cos. began an auction process to sell itself after rejecting a $48 billion takeover bid last month.

Planned expansions by MPLX Marathon’s will eliminate bottlenecks, enabling MarkWest’s northeastern products to reach Midwest refineries, Gulf Coast refineries, and Canadian Oil Sands fields where gas is used as a diluent, Randy Nickerson, Markwest’s Chief Commercial Officer, said on a call with analysts.

“The deeper we got, the more opportunities we saw,” he said. “After a year at looking at those opportunities, we are where we’re here now.”

New Competitor

Under the MarkWest merger agreement, common unit holders in the acquired company will get 1.09 MPLX common units and a one-time cash payment of $3.37 a MarkWest unit, or the equivalent of $78.64 a unit, a 32 premium to the July 10 closing price. MPLX’s sponsor, Marathon Petroleum Corp., will contribute $675 million to fund the cash payment.

“This combination creates a unique new competitor in the midstream sector,” Heminger said in the statement. “The success of this combination centers on sustainable growth.”

Marathon intends to convert cash distributions from the partnerships into more midstream expansion, Chief Executive Officer Gary Heminger said on the call. New projects would be sold to the partnership.

MarkWest is largest processor of gas in the Marcellus and Utica shale regions of Pennsylvania and Ohio.

The deal is expected to close in the 2015 fourth quarter, subject to approval of MarkWest unit holders and regulatory agencies. UBS Investment Bank AG acted as financial adviser and Jones Day acted as legal adviser to MPLX. Jefferies Group LLC acted as financial adviser and Cravath, Swaine & Moore LLP acted as legal adviser to MarkWest.