Buffett’s Berkshire Hathaway (BRK.A) to Acquire Philips 66 (PSX) Unit

Berkshire Hathaway Inc (NYSE:BRK.A) (BRK.B), the conglomerate controlled by billionaire investor, Warren Buffet agreed to acquire Phillips Specialty Products Inc (PSPI), the unit of Phillips 66 (NYSE:PSX) expert in maximizing the flow potential of pipelines.

According to Phillips 66 (NYSE:PSX), Buffett’s conglomerate will use its stockholdings in the energy company as payment for the flow improver business. Berkshire Hathaway Inc (NYSE:BRK.A) (BRK.B) owns 19 million shares of Phillips 66. The total numbers of shares that will be paid to the energy company will be determined by its stock price during the closing of the transaction.

“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,” said Buffett.

He is also planning to delegate the responsibility of overseeing the strategic direction for PSPI to James L. Hambrick, CEO of Lubrizol Corporation, a leader in specialty chemicals and a subsidiary of Berkshire Hathaway Inc (NYSE:BRK.A) (BRK.B).

On the other hand, Greg Garland, chairman and CEO of Phillips 66 (NYSE:PSX) said, “Berkshire Hathaway made a strong offer for our high-performing flow improver business. This transaction optimizes our portfolio and focuses growth on our Midstream and Chemicals businesses.”

Phillips 66 (NYSE:PSX) said PSPI is expected to have approximately $450 million cash and cash equivalents on its balance sheet at the closing of the deal during the first half of 2014.

Cory Garcia, analyst at Raymond James & Associates Inc told Bloomberg in a telephone interview that “Phillips is figuring out another way to extract value from a business that they think is being weighed down by a valuation that isn’t justified. While funds from this unit flow through the income statement, they haven’t historically called out its impact. It’s a nice, accretive transaction.”

Most recently, MidAmerican Energy Holdings, the energy subsidiary of Berkshire Hathaway Inc (NYSE:BRK.A) (BRK.B) completed its merger agreement with NV Energy Inc (NYSE:NVE) after receiving the approval from regulators including the Public Public Utilities Commission of Nevada (PUCN), the Federal Energy Regulatory Commission (FERC) and the U.S. Department of Justice (DOJ).

MidAmerican Energy Holdings purchased all the outstanding shares of the common stock of NV Energy Inc (NYSE:NVE) for $23.75 per share in cash.