Breaking Away

On the day Marathon Oil announced that it was spinning off its pipeline and refining business, investors responded by bidding up its stock 11 percent. A little over a year later, Marathon and its spin-off, Marathon Petroleum Corp., have a combined market cap of $39 billion—more than double Marathon’s market cap when the deal was announced. Shareholders liked the spin-off so much this year that the spin-off company announced that it was considering spinning out the pipeline business from the spin-off.

If the eighties were known for leveraged buyouts, and the nineties for IPOs, we may be entering the decade of spin-offs. Last year was rife with big ones. ITT Corp., a company that for decades could not be mentioned without the word conglomerate in the same sentence, split itself into three tightly focused entities; Cargill Inc. spun out its controlling interest in fertilizer company Mosaic Co.; Sunoco Inc. created the SunCoke Energy materials business; and Marathon Oil spun off at least one new business, for now.