Murphy Oil Futures: How Spinning Off Retail Could Bring Joy to Shareholders

by Mark Friedman  on Monday, Nov. 26, 2012 12:00 am  

Murphy Oil is spinning off its new retail company, Murphy USA Inc., which includes 1,154 gasoline stations, mainly in the parking lots of Wal-Mart Supercenters. (Photo by Mike Pirnique)

Third Point owns about 1.5 million shares, or less than 1 percent of the outstanding shares. It said that in the last three years, it had watched Murphy’s stock price fall about 15 percent while the Standard & Poor’s Oil & Gas E&P Index climbed by about 50 percent.

“This issue has been exacerbated by management’s decision to repeatedly delay spinning off its retail business,” said Third Point’s letter, which was filed with the Securities & Exchange Commission.

“Investors in Murphy have grown frustrated, particularly given the obvious merits of the spin due to the large multiple disparity between the retail business and the core [exploration & production] business.”

The push worked.

On Oct. 16, Murphy announced it was going to spin off the retail business into a new company to be called Murphy Oil USA Inc.

The company also announced that it would pay a special dividend of $2.50 a share for a total dividend of about $500 million and a share buyback program of up to $1 billion.

The dividend will be paid Dec. 3 to the shareholders of record on Nov. 16. The $2.50 dividend is in addition to the $0.3125 per share that was previously announced and also will be paid on Dec. 3.

“Today’s announcements are consistent with our commitment to creating value for shareholders,” said Claiborne Deming, chairman of Murphy’s board.

The announcement, however, didn’t say what the move would mean for Murphy shareholders.

Other Spinoffs

Murphy shareholders could logically expect to see some shares in Murphy USA. When Murphy Oil spun off its timber business in 1996, Murphy Oil gave shareholders one share in Deltic Timber Corp. of El Dorado for every 3.5 shares of Murphy Oil they held.

There were 12.8 million shares of Deltic available, and it closed at $20.73 on Dec. 26, 1996. It closed at $61.08 on Nov. 15.



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