Berkshire Hathway looking at a billion dollar acquisition

Berkshire Hathaway, owned by Warren Buffet, plans to pay almost one billion dollars in order to purchase a business that makes the product that controls how fast or slow crude flows through oil pipelines. The company is named Phillips 66 and is a spin off of ConocoPhillips that split last year to focus on refining and pipelines. Philips 66 announced this past Monday that they would be accepting Warren Buffets offer to buy the flow improver division of the company.

Interestingly enough, Berkshire will be responsible for paying for the deal but they will not be paying with Berkshire stock or cash. Instead they will be handing about 16 million of the shares that Mr. Buffet currently has in the Berkshire investment portfolio back to Phillips. At the moment Philips 66 is involved in a $3bn share buyback, and at the moment Buffet has about 27 million worth of their shares so in order to purchase the company he will simply be giving back his shares.

Buffet commented that he has been watching the Philips 66 business portfolio for quite some time and believes that the flow improver business continues to be high quality with a very consistent financial performance. For this reason he feels that it will fit very well into the investment portfolio of Berkshire Hathaway.

Berkshire Hathaway now owns the Phillips Specialty Products Inc division which is responsible for manufacturing and developing the polymers that increase the flow of pipelines that are responsible for transporting crude oil, waste water, and refined products. The division has 140 employees that are mainly based in Texas but also includes a sales force in Russia and in Belgium. The actual operating profits and sales for the company were not released as part of the sale details; however, the deal is estimated to be worth more than $1.4 billion based on share prices.