Elliott Investment Management has reportedly acquired a stake exceeding $2.5bn in Phillips 66 and plans to advocate for operational changes, including the sale of the company’s midstream business.
The news has seen Phillips 66 shares rise by 3.3% in late morning trade, reported Reuters.
Last year, Elliott bought a $1bn stake in Phillips 66, prompting the company to announce a performance improvement plan aimed at enhancing shareholder returns and share price.
Despite these efforts, Elliott has expressed dissatisfaction, stating that the plan “failed to materialise, and it has become evident that urgent changes are needed”.
The investment firm highlighted that Phillips 66′ share performance has not kept pace with its competitors.
Elliott said: “A streamlined Phillips would include the sale or spin-off of the midstream business, the sale of the company’s interests in CPChem and the sale of the JET retail operations in Germany and Austria.”
An investor suggested that if Phillips 66 sells or spins off its midstream business, it could be valued at more than $60bn.
Phillips 66 has not yet responded to a request for comment on Elliott’s plans for its midstream business.
As of the last stock close, Phillips 66 had a market capitalisation of $51.09bn, according to LSEG data.
Elliott has emphasised the need for new independent directors on Phillips 66′ board to increase accountability and oversee a management review.
The hedge fund has also urged the refiner to set ambitious refining targets and focus on profitability, especially as refining margins have declined for many US operators.
Analysts from TD Cowen have weighed in, suggesting that selling the midstream business might not resolve the issues of refining underperformance and could result in more volatile earnings for Phillips 66.
Since last year, Elliott has been actively pushing for changes at various companies, with its latest move being an increased stake in oil giant BP.
BP plans to sell a German refinery as part of CEO Murray Auchincloss’ $2bn (£1.61bn) cost-cutting goal by 2026.
