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Berkshire Hathaway To Buy Flow Improver Business From Phillips 66

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12/31/2013 12:50 AM ET

Billionaire investor Warren Buffett's Berkshire Hathaway Inc. (BRK.A, BRK.B) announced Monday that it is acquiring Phillips Specialty Products Inc. or PSPI, a flow improver business, from Phillips 66 (PSX: Quote), an energy manufacturing and logistics company.

The company noted that Phillips 66 will receive its own shares currently held by Berkshire Hathaway as the consideration of the deal, while the specific number of shares will be determined by the share price at deal closing.

However, in a filing with the Security Exchange Commission or SEC, Phillips 66 stated that the exchange of the unit will be for approximately 19 million shares of Phillips 66 shares held by Berkshire Hathaway. At Monday's closing price, 19 million shares are worth about $1.42 billion.

Phillips 66 added that it expects PSPI's balance sheet at closing to include approximately $450 million of cash and cash equivalents. 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 by reference to the volume weighted average price of Phillips 66 common stock on the closing date.

The sale is part of Phillips 66's ongoing portfolio management and supports the company's growth strategy. The transaction is expected to close in the first half of 2014, following regulatory review.

According to Berkshire Hathaway, PSPI leads the science of drag reduction and specializes in developing polymers to maximize the flow potential of pipelines.

Warren Buffett, Berkshire Hathaway chief executive officer, said, "I have long been impressed by the strength of the Phillips 66 business portfolio. The flow improver business is a high-quality business with consistently strong financial performance, and it will fit well within Berkshire Hathaway. I plan to have James L. Hambrick, CEO of The Lubrizol Corporation, oversee its strategic direction."

Greg Garland, Chairman and CEO of Phillips 66, added that Berkshire Hathaway made a strong offer for its high-performing flow improver business, and that the deal optimizes the company's portfolio and focuses growth on its Midstream and Chemicals businesses.

Berkshire Hathaway shares closed Monday's trading at $177,069.20, down 90.80 or 0.05 percent.

Phillips 66 shares settled at $74.72 in the regular trading, down $0.03 or 0.04 percent. In the after hours trading, shares gained $0.18 or 0.24 percent, and traded at $74.90.

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by RTT Staff Writer

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