Marathon Petroleum said Monday it had agreed to acquire rival Andeavor for $36 billion in a deal that would make it the largest oil refiner by capacity in the U.S.

With Marathon currently the second-largest and Andeavor, formerly Tesoro, the fifth-largest refiner, the combined companies would overtake Valero Energy, processing 3 million barrels per day at 16 refineries spread across the country.

Andeavor’s 3,200 convenience stores and gas stations would also be incorporated into Marathon’s Speedway chain. Marathon will pay $152 per share for Andeavor, a premium of about 24% to the closing price on Friday.

“This transaction combines two strong, complementary companies to create a leading U.S. refining, marketing, and midstream company,” Marathon CEO Gary R. Heminger said in a news release.

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He added that the deal “diversifies our refining portfolio into attractive markets, increases access to advantaged feedstocks, enhances our midstream footprint in the Permian basin, and creates a nationwide retail and marketing portfolio that will substantially improve efficiencies and enhance our ability to serve customers.”

Marathon operates seven refineries in the Midwest and on the Gulf Coast while Andeavor has eight refineries primarily on the West Coast.

As The Financial Times reports, “U.S. refineries have benefited from the surge in U.S. shale output oil output this decade, which has pushed U.S. crude oil prices to a consistent discount versus international benchmark Brent.”

“Andeavor’s plants on the West Coast have benefited less from this trend, however, as California, the largest market for its fuels, has more stringent fuel specifications than the rest of the U.S.,” the FT noted.

For the first quarter, Marathon’s profit jumped 23%, led by higher refining and marketing margins, while total revenue jumped 16% to $18.98 billion.

The company expects to fully realize more than $1 billion in annual run-rate cost and operating synergies within the first three years of the Andeavor deal. In trading Monday, its shares fell 6.8% to $75.82.

“Ultimate sentiment around the deal is likely to revolve around management’s ability to convince investors of the potential synergies,” said Brad Heffern, an analyst at RBC Capital Markets.

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