Berkshire Hathaway to buy Phillips 66 unit for around $1.4 billion

NEW YORK Mon Dec 30, 2013 9:45pm EST

Berkshire Hathaway shareholders walk by a video screen at the company's annual meeting in Omaha May 4, 2013. REUTERS/Rick Wilking

Berkshire Hathaway shareholders walk by a video screen at the company's annual meeting in Omaha May 4, 2013.

Credit: Reuters/Rick Wilking

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NEW YORK (Reuters) - Warren Buffett's Berkshire Hathaway Inc struck a deal to buy a Phillips 66 business that makes chemicals to improve the flow potential of pipelines for around $1.4 billion of stock.

Phillips 66 said on Monday that Berkshire will pay for the unit, Phillips Specialty Products Inc, using about 19 million shares of Phillips 66 stock that it currently owns.

"I have long been impressed by the strength of the Phillips 66 business portfolio," Buffett said in a statement. "The flow improver business is a high-quality business with consistently strong financial performance."

The exact number of shares Berkshire will pay for the unit will be determined by their price on the closing date, the companies said.

James Hambrick, CEO of Berkshire's specialty chemicals unit Lubrizol Corp, will oversee the business, Buffett said. Berkshire bought Lubrizol for about $9 billion in 2011.

Phillips 66 CEO Greg Garland said the company decided to sell the business because Berkshire Hathaway made a strong offer. He said the company will now focus its growth on its oil and natural gas transportation and processing business, as well as its other chemicals businesses.

Phillips 66 said it expects the Phillips Specialty Products unit to have about $450 million of cash and cash equivalents on its balance sheet at closing. It expects the deal to close in the first half of 2014.

Berkshire favors larger companies with consistent earnings power and easy-to-understand businesses.

In June, it paid $12.3 billion for half of ketchup maker H.J. Heinz Co, and in May said it paid $2.05 billion for the 20 percent it did not already own of Israeli toolmaker Iscar.

Earlier this month, Berkshire's MidAmerican Energy unit paid $5.6 billion for the Nevada utility NV Energy Inc.

Omaha, Neb.-based Berkshire still has the capacity to make one or more large purchases, which Buffett calls "elephants."

Berkshire ended September with $42.08 billion of cash and equivalents, and generates significant cash from the insurance operations for which it is perhaps best known.

(Reporting by Michael Erman and Jonathan Stempel; editing by Andrew Hay)

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Comments (2)
WhyMeLord wrote:
Shirt makers are out of their element when playing around with oil.
Warren looks a little “long in the tooth” these days, don’t you see.
His days are numbered, and his advice a bit dated; time to move on.
New Year’s Resolution #1; out with the old, in with the new bitcoin.

Dec 30, 2013 11:43pm EST  --  Report as abuse
bachcole wrote:
It is obvious that Buffett has no idea that LENR is on it’s way.

Dec 31, 2013 1:48pm EST  --  Report as abuse
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