It said the stock offering and the acquisition will reduce its earnings per share in 2004, but full ownership of Marathon Ashland Petroleum, or MAP, is expected to boost profit and cash flow starting in 2005.

Marathon described MAP as one of the best-performing companies in the refining industry. Findlay, Ohio-based MAP is the No. 5 U.S. refiner, operating seven refineries with total production capacity of 948,000 barrels of oil a day.

It also owns or leases more than 8,000 miles of pipeline and retails fuels through 6,000 outlets doing business under the Marathon, Speedway, Super America and Pilot Travel Center brands.

In the acquisition, Marathon said it would pay $315 million in common stock and about $794 million in cash and accounts receivable from MAP. It will also assume $1.9 billion of debt and environmental liabilities with a present value of $15 million.

As part of the deal, Marathon said it will purchase two complementary Ashland businesses for about $94 million: 61 Valvoline Oil Change centers in Michigan and Ohio, and an operation that produces a chemical used in pharmaceuticals, dyes and resins.

Marathon said the MAP transaction, expected to close in the fourth quarter, will depend on the U.S. Internal Revenue Service declaring the deal tax-free. Approval by Ashland stock and bond holders is also required.

ASHLAND OUTLOOK

Covington, Kentucky-based Ashland, which produces and distributes chemicals and operates one of the largest highway paving and construction businesses in the U.S., said it would not receive MAP cash distributions between now and the completion of the deal.

As a result, the final amount received by Ashland in the deal will be increased by an amount equal to 38 percent of the cash accumulated from MAP operations during that period.

Separately, Ashland said its construction and chemicals businesses continue to see improved performance in the current quarter. Ashland Paving and Construction expects its quarterly loss to narrow to between $30 million and $40 million, from a year-earlier loss of $57 million.

Operating income from chemicals is expected to jump to between $50 million and $55 million, up from $30 million a year earlier, it said.

Padilla said Kerry "voted for NAFTA, now he seems to be against it. He voted for trade promotion authority in 2002, now he's against the agreements we're negotiating under it.

He voted in favor of some fairly specific instructions ... on how to do labor and environmental provisions (in trade agreements) ... and now he says they're not good enough."

Pro-trade Democrats insist Kerry is not a protectionist, even if he has played on public anxiety about trade-related job losses in his campaign.

"I'm very confident if Sen. Kerry is elected president that he'll embrace a very responsible trade liberalization policy," said Rep. Cal Dooley, a California Democrat who has worked with the Bush administration to pass trade legislation.

He compared Kerry to former President Bill Clinton, who took a tough stance on trade with China before he was elected in 1992 and ended up negotiating a landmark deal to establish permanent normal trade relations with Beijing.

Democrats point out Bush has shown his own protectionist tendencies, most notably his 20-month tariff program on steel and his decision to sign legislation raising U.S. farm subsidies by billions of dollars annually.

"I think President Bush would have trouble making the case he's a perfect free trader," said Greg Mastel, a former Democratic trade adviser for the Senate Finance Committee who is now at an international law firm.