Phillips 66, Marathon held now-scuttled merger talks

Phillips 66 and Marathon Petroleum engaged in merger discussions earlier in the year, aiming to create a $180 billion oil-and-gas behemoth, according to sources familiar with the situation. However, the talks ultimately failed and are unlikely to be pursued again, according to the sources. Despite this, the mere fact that such negotiations took place highlights the level of enthusiasm surrounding M&A deals during the Trump administration.

The proposed merger would have combined the two companies, which together control around a quarter of the US refining capacity. The administration, known for approving substantial mergers in other sectors such as Warner Bros. Discovery for $110 billion and Juniper Networks for $14 billion, also supported the potential Phillips 66-Marathon deal.

The Justice Department's Stanley Woodward, however, has been pushing for avoiding trials and favoring settlements. The merged entity would have enjoyed higher profit margins, particularly during periods of lower fuel prices, by securing better pricing from crude traders. Both companies possess complementary businesses, including extensive pipeline and storage networks.

However, integrating their operations would have been challenging. Phillips 66 holds a joint venture with Chevron in the chemicals sector, and acquiring this joint venture would have been a right of first refusal for both parties. Additionally, Marathon's publicly traded but controlled subsidiary MPLX would have introduced further complexities to the potential combination.