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Item 1.01
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Entry into a Material Definitive Agreement.
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On August 2, 2020, Marathon Petroleum Corporation (the “Company”) entered into a purchase and sale agreement (the “Purchase Agreement”) with certain of its subsidiaries set forth therein (collectively, “Sellers”) and 7-Eleven, Inc. (“Purchaser”). Upon the terms and subject to the conditions set forth in the Purchase Agreement, Sellers have agreed to transfer the assets and liabilities constituting the Company’s convenience store business, including the sale of retail transportation fuel and convenience store offerings (the “Business”) to Purchaser for a purchase price of $21 billion, subject to certain adjustments based on the levels of cash, debt and working capital at closing and for certain potential tax benefits (such transaction, the “Transaction”). The Company will retain its direct dealer business. In connection with the Transaction, the Company and Purchaser, or their affiliates, will enter into certain ancillary agreements, including a 15-year fuel supply agreement for approximately 7.7 billion gallons per year associated with the Business. Further, the Company expects incremental opportunities over time to supply Purchaser’s remaining business as existing arrangements mature and as Purchaser adds new locations in connection with its announced U.S. and Canada growth strategy.
Concurrently with the execution of the Purchase Agreement, Seven & i Holdings Co., Ltd., a company incorporated under the laws of Japan, delivered a guarantee in favor of the Company and Sellers pursuant to which Buyer Parent is guaranteeing the payment of the initial purchase price by Buyer under the Purchase Agreement. The Purchase Agreement and the Transaction were unanimously approved by the Board of Directors of the Company.
The consummation of the Transaction is subject to customary closing conditions, including the expiration or early termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, the absence of any injunction or law preventing or prohibiting the closing, the delivery of certain closing deliverables, the accuracy of the other party’s representations and warranties contained in the Purchase Agreement (subject, with specified exceptions, to materiality or “Material Adverse Effect” standards) and the other party’s performance of its covenants and agreements in the Purchase Agreement in all material respects. Each party is required under the Purchase Agreement to use reasonable best efforts to take actions necessary to obtain all regulatory approvals as promptly as practicable and prior to the Outside Date (as defined below), including agreeing to divestitures and operational restrictions, subject to a divestiture cap of assets that generated $400 million in aggregate store-level EBITDA for the 12 calendar months ended December 31, 2019.
The Purchase Agreement contains customary representations, warranties and covenants of each of the Company and Sellers, on the one hand, and Purchaser, on the other hand, including covenants by the Company and Sellers relating to the operation of the Business prior to the closing and to implement certain internal restructuring steps prior to the closing. The representations and warranties of the Company and Sellers will generally survive the closing until the second anniversary of the closing date, subject to certain limited exceptions. Each of the Company and Sellers, on one hand, and Purchaser, on the other hand, has agreed to indemnify the other for certain losses arising out of breaches of covenants and for certain losses arising out of retained liabilities or assumed liabilities and the operation of the Business following the closing of the transaction (as applicable), subject to certain limitations.
The Purchase Agreement contains certain termination rights for the Sellers and Purchaser, including the right to terminate the Purchase Agreement if the Transaction is not consummated by May 2, 2021, subject to two extensions of three months (but no more than six months in total) if the required antitrust approvals described above have not yet been obtained (the “Outside Date”).
The foregoing description of the Purchase Agreement is not complete and is qualified in its entirety by reference to the Purchase Agreement, a copy of which is attached to this Current Report on Form 8-K as Exhibit 2.1 and is incorporated herein by reference.
The representations, warranties and covenants set forth in the Purchase Agreement have been made only for the purposes of the Purchase Agreement and solely for the benefit of the parties thereto, and may be subject to limitations agreed upon by the contracting parties, including being qualified by confidential disclosures made for the purposes of allocating contractual risk between the parties to the Purchase Agreement instead of establishing these matters as facts. In addition, information regarding the subject matter of the representations and warranties made in the Purchase Agreement may change after the date of the Purchase Agreement. Accordingly, the Purchase Agreement is included with this Current Report on Form 8-K only to provide investors with information regarding its terms and not to provide investors with any other factual information regarding the Company, Sellers, their subsidiaries or their businesses as of the date of the Purchase Agreement or as of any other date.