Summary
Phillips 66 (PSX) announced a significant share repurchase agreement with Berkshire Hathaway Inc. and its subsidiary, National Indemnity Company, on February 13, 2018. The company is set to buy back approximately 35 million shares of its own common stock for a total of about $3.3 billion. This transaction, priced at $93.725 per share based on the preceding day's volume-weighted average price, is a substantial capital allocation move that signals management's confidence in the company's valuation and its ability to generate free cash flow. The repurchase is expected to close on February 14, 2018, and will be funded through a combination of existing cash and new borrowings under its commercial paper program, including approximately $1.4 billion already drawn. For investors, this move suggests a potential increase in earnings per share due to the reduced share count and signals a commitment to returning capital to shareholders, although it also implies an increase in leverage.
Key Highlights
- 1Phillips 66 entering into a Stock Purchase and Sale Agreement with Berkshire Hathaway Inc. to repurchase 35 million shares of common stock.
- 2The total aggregate purchase price for the shares is approximately $3.3 billion.
- 3The repurchase price per share is fixed at $93.725, based on the volume-weighted average price on February 13, 2018.
- 4The transaction is scheduled to close on February 14, 2018, indicating a swift execution.
- 5Funding for the repurchase will come from a mix of cash on hand and borrowings under the commercial paper program.
- 6Approximately $1.4 billion of the repurchase is being funded by new borrowings under the existing commercial paper program.
- 7The agreement represents a significant return of capital to a major shareholder (Berkshire Hathaway).