Paul Singer owned Elliott Management, an activist investor, sent a letter and presentation to Marathon Petroleum.

Elliott Management demanded of Marathon’s board that the company split into three separate businesses, thereby unlocking value worth $22 billion.

That would imply a potential upside of 61% in the stock price of Marathon. It would also generate a sizable bounty for Elliott, which owns 2.5% of Marathon Petroleum.

Elliott previously engaged with Marathon. However, that episode ended after management assured it would take steps for improving performance. “Those promises have not been kept, and Elliott continues to believe that Marathon is severely undervalued,” said the activist investor.

Elliott Management’s mantra for Marathon: a 3-way split

Elliott suggested Marathon split itself into three individual new companies, each of which would be a leader in its field.

The three companies would be in the retail, midstream, and refining sectors, respectively.

• “Speedway” – the largest US-listed convenience chain
• “MPLX” – a top-five US midstream operator
• “New Marathon” – the largest independent merchant refiner in the US

Elliott Management claimed the above restructuring would release $22 billion in value for shareholders, all else remaining the same. Moreover, the hedge fund also said Marathon could release another $17 billion by tweaking operations of its world-class assets to their optimal level.

Therefore, the two moves suggested above could together unleash a 100% upside in the Marathon stock.

Andeavor acquisition counter-productive

Elliott alleged that the deal to acquire Andeavor “created a new, larger and even more complex Marathon structure, which we believe compounded the Company’s historical valuation issues.”

The transaction, therefore, took a toll on Marthon’s stock which underperformed peers thereafter.

Further, according to Elliott Management, the current holding structure of Marathon will “trade at a perpetual discount” to the sum of its parts.

Marathon Petroleum shares surge

The shares of Marathon Petroleum are trading at $60.07, up 8.27% after Elliott’s announcement. According to Bloomberg, Marathon management said in an email that the company would evaluate the proposal from Elliott Management.