US-based refining company Phillips 66 (PSX) has agreed to take full ownership of Phillips 66 Partners (PSXP) by acquiring the shares it previously didn’t own in the latter in an all-stock deal worth $3.4bn.
Based in Texas, Phillips 66 Partners is a publicly listed master limited partnership, which was created in 2013 by Phillips 66 to operate in the midstream sector.
Its operations consist of transportation of crude oil, natural gas liquids (NGLs), and refined petroleum products along with terminalling, fractionation, processing, and storage across the US. The majority of the partnership’s assets are associated with Phillips 66’s operated refineries.
Phillips 66 said that the deal to acquire all outstanding units of the partnership will simplify governance and corporate structure. According to the company’s 2020 factbook, it owns a 74% limited partner interest in Phillips 66 Partners, while public shareholders own a 26% limited partner interest and 13.8 million perpetual convertible preferred units.
The refiner proposes to acquire all of the publicly held common units representing limited partner interests in the partnership by offering 0.5 of its shares in exchange for each of the Phillips 66 Partners’ common units.
As per the terms, Phillips 66 Partners’ preferred units will be converted into common units at a premium to the original issuance price before exchanging the common stock of Phillips 66.
Phillips 66 chairman and CEO Greg Garland said: “We believe this acquisition will allow both PSX shareholders and PSXP unitholders to participate in the value creation of the combined entities, supported by the strong financial position of Phillips 66.”
After the closing of the deal, Phillips 66 Partners will become a fully-owned subsidiary of Phillips 66 and will cease to be a publicly traded partnership.
The deal is being backed by Phillips 66’s fully-owned subsidiary Phillips 66 Project Development, which holds a majority of the outstanding common units of the partnership.
The deal is anticipated to close in Q1 2022, said Phillips 66.
