Phillips 66 (PSX) announced that it has entered into an agreement with Berkshire Hathaway Inc. (BRK.A) (BRK.B) to divest its wholly owned subsidiary Phillips Specialty Products Inc. ("PSPI"). Following regulatory review, the transaction is expected to close in the first half of 2014.
Per the agreement, Phillips 66 will exchange all of its common stock in PSPI for approximately 19 million shares of its common stock owned by Berkshire Hathaway. The company expects PSPI's balance sheet at closing to include approximately $450 million of cash and cash equivalents.
However, the exact number of Phillips 66 shares to be delivered by Berkshire Hathaway, and the amount of PSPI's cash and cash equivalents, will be determined with reference to the volume-weighted average price of Phillips 66 common stock on the closing date of the transaction.
PSPI, a wholly owned subsidiary of Phillips 66, operates the company's flow improver business. It focuses on the science of drag reduction, specializing in maximizing the flow potential of pipelines.
The strength of Phillips 66’s business model reflects its commitment to return value to shareholders along with its strong cash generation capabilities. Phillips 66 has a good capital deployment policy through share repurchase and payment of dividends. We believe that the Berkshire transaction will boost investor confidence in the stock, and drive shareholder value.
Phillips 66, an independent publicly traded company, was formed after the spin-off of the refining/sales business of ConocoPhillips (COP) in 2012. The move resulted in the creation of the largest refining company in the U.S. and the largest exploration and production player based on oil and gas reserves.
Phillips 66, is headquartered in Houston, Texas. In addition to the refining, marketing and transportation businesses, the company has emerged as an integrated downstream company with most of the Midstream and Chemicals segments as well as power generation and certain technology operations included in the Emerging Businesses segment. Phillips 66 currently retains a Zacks Rank #3 (Hold).
In addition to Phillips 66, one can consider an energy sector stock like Clayton Williams Energy, Inc. (CWEI) which currently sports a Zacks Rank #1 (Strong Buy).
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