By Vallari Srivastava
(Reuters) -Elliott Investment Management said on Tuesday it has built a stake of more than $2.5 billion in U.S. refiner Phillips 66, and plans to push for operational changes and the sale of the company’s midstream business.
Phillips 66 shares rose 3.3% in late morning trade.
Last year, Elliott disclosed a $1 billion stake in Phillips 66, following which the company laid out a performance improvement plan to boost shareholder returns and share price.
However, Elliott said the plan “failed to materialize, and it has become evident that urgent changes are needed” adding that the company’s shares have lagged that of rival refiners.
On Monday, Reuters reported the investor had built a stake of over $2.5 billion in Phillips 66.
“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,” Elliott said on Tuesday.
If the company does sell or spin-off its midstream business, it could command a valuation of more than $60 billion, the investor said.
Phillips 66 did not immediately respond to a request for comment regarding Elliott’s plans for its midstream business.
Phillips 66 had a market capitalization of $51.09 billion as of stock’s last close, according to LSEG data.
Elliott also stressed that Phillips 66’s board needed new independent directors to bolster accountability and conduct a review of management.
The hedge fund added the refiner must commit itself to ambitious refining targets and prioritize profitability at a time when margins have dropped for most U.S. refiners.
TD Cowen analysts said selling the midstream business would not address refining underperformance, and could leave Phillips 66 with more volatile earnings.
Elliott has sought changes at several companies since last year, most recently taking a stake in oil major BP .
(Reporting by Vallari Srivastava in Bengaluru; Editing by Shinjini Ganguli and Shailesh Kuber)
