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Elliott says Phillips 66 shares could reach $200 if there are changes

Elliott Investment Management stated on Thursday that Phillips 66 stock could almost double to $200 if it sold or spun off its midstream businesses, and focused more on refining.

The activist investor who owns a stake of $2.5 billion in the company has also reduced the number to four directors that it intends to nominate for the board. Previously, the number was seven.

Phillips 66, in a letter to shareholders published in a regulatory filing on Thursday, wrote: "With resolute action and decisive actions, Phillips 66 will deliver much greater returns to its shareholders than they have in the past decade."

The hedge fund said that "sweeping changes" are also needed to the company’s structure, operations and board.

Elliott nominated 7 director candidates for the board at the beginning of March, but had planned to reduce that number to 4, according to a person with knowledge in the matter.

Investors will vote for directors on the 21st of May unless both sides come to an agreement prior.

Candidates include former ConocoPhillips executives Sigmund and Brian Coffman; Michael Heim, founder of midstream operator Targa Resources, and Stacy Nieuwoudt. Nieuwoudt was a former energy consultant at Citadel.

Elliott stated that new independent directors were needed to oversee management better and to persuade BP to sell or spin off its midstream business in order to concentrate on refining. The company has also been criticized for its governance in which not all directors are elected annually.

The company refused to comment.

Phillips 66's shares closed at $107.18, down 13.6% after a widespread sell-off on Wall Street. The company now has a $43.7 billion market value.

Elliott reiterated his long-held opinion that the midstream business should be spun off or sold.

The letter also suggested that retail operations in Europe and its interest in CPChem (a joint venture between Chevron and CPChem) should be sold.

Elliott is fighting Phillips 66 for the second time after pushing for strategic improvements late in 2023. The hedge fund approved the appointment of Robert Pease as a director to the company's board in early 2024.

The tensions between the activist investor and the director have now escalated after Pease, in a letter sent to shareholders last Thursday, defended the performance of the company and referred to Elliott's actions as "inconsistent" and "peculiar." The hedge fund wants to replace him by the candidates that it nominated in this year.

In a letter sent to its shareholders on Thursday, Elliott said that it was confused after Pease failed to follow the best governance practices he had promised the hedge fund. It said that it had been patient with Phillips 66, and only approached the company anew after failing to see "demonstrable improvements." Reporting by Svea Autumn-Bayliss and Vallari Srivastava, both in New York; editing by Shrey Biswas and Jamie Freed

(source: Reuters)