Elliott builds more than $2.5B stake in Phillips 66, wants it to sell or spin off midstream unit

NEW YORK (AP) — Activist investor Elliott Investment Management LP has built up a more than $2.5 billion stake in Phillips 66, and is looking for the energy company to either sell or spin off its midstream unit to help boost its stock price.

Shares rose nearly 4% in Tuesday morning trading.

In a letter to Phillips 66's board, Elliott said that it believes the company could get more than $40 billion for its midstream business, or transporting and storing crude and refined products.

“This standout business should separate from a corporate structure that both diminishes and obscures its value,” Elliott wrote. Its investment makes it one of the top five investors in Phillips 66.

The hedge fund also recommended that Phillips 66 consider divesting non-essential assets such as CPChem and certain European retail operations in order to increase capital returns to shareholders and be able to concentrate more fully on its core refinery business. Chevron Phillips Chemical is a joint venture between Chevron U.S.A. Inc. and Phillips 66 that was created in July 2000.

In addition, Elliott wants Phillips 66 to add new independent directors to its board.

Phillips 66 did not immediately respond to a request for comment.

Last month the Houston-based company reported a fourth-quarter adjusted loss of 15 cents per share on revenue of $33.99 billion. The results beat the expectations of analysts surveyed by Zacks Investment Research, which were calling for a loss of 20 cents per share on revenue of $32.03 billion.

Elliott has a long history of activism. Last week Honeywell, one of the last remaining U.S. industrial conglomerates, announced that it will split into three independent companies. The news came after Elliott revealed a stake of more than $5 billion in the aerospace, automation and materials company and pushed for Honeywell to separate its automation and aerospace businesses.