Chevron (CVX.US) is rumored to be interested in acquiring Phillips 66 (PSX.US) shares in a chemical joint venture

Zhitong Finance learned that, according to people familiar with the matter, Chevron (CVX.US) is interested in acquiring Phillips 66 (PSX.US) shares in a chemical joint venture, and the radical shareholder Elliott Investment Management Company is urging the refinery to withdraw from the joint venture. The person familiar with the matter said that Chevron is seeking to increase its exposure in the petrochemical products sector at an appropriate price, and if Phillips 66 opens up to it, the joint venture Chevron Phillips Chemical Co., may become an acquisition target.

Regulatory documents show that both Chevron and Phillips 66 have preferential purchase rights over each other's shares. This means that if they want to sell, they must first propose a deal to another partner. People familiar with the matter added that Chevron had intended to buy out its holdings for some time. There are currently no negotiations, and it is unclear whether Phillips 66 is willing to sell these shares, or how much these shares are worth.

Hedge fund Elliott announced an adjustment plan for Phillips 66 shares earlier this month. Elliott said in his submission that the potential sale value of these shares is around $15 billion. However, this valuation may vary greatly, depending on the outlook for profit margins in the chemical industry, which is currently close to a multi-year low.

Elliott designated Phillips 66 to sell 50% of its CPChem holdings to focus on its core fuel manufacturing business. “This business is likely to attract significant interest from existing joint venture partners or other buyers,” Elliott said in an investor report called “Streamline66” this month.

Chevron CEO Mike Wirth emphasized in an interview on February 5 that demand for chemicals is “very strong” due to more people entering the middle class around the world and the greater demand for energy-efficient, lightweight plastics in airplanes and cars. “Demand for petrochemical products will be strong,” he said. This is another area of interest for us.”

In 2000, Chevron and Phillips 66 merged two medium-sized chemical companies to form a joint venture, CPChem. After building lucrative plants in the Middle East and the US Gulf Coast, the company grew to become the 32nd largest global chemical company by revenue in 2023, according to data from industry consulting and data provider ICIS.

CPChem also has several growth projects, including a $8.5 billion polymer facility in Orange, Texas, and a $6 billion complex in Qatar. Both plants will use low-cost ethane as a feedstock, giving them a competitive advantage over the more expensive plants in Europe and Asia that use naphtha.

When asked about future acquisition plans, Wirth told the media that his focus was to complete the $53 billion acquisition of Hess later this year. He said, “We're in a good position today, so we don't need to do anything. We're only going to do what's really right for our company today, if the price is right and creates value for our shareholders.”