Elliott Management Applies Pressure With Phillips 66 Board Fight

2025-03-26 13:19:50 ET

Summary

• Phillips 66 has underperformed compared to peers, with chronic issues in its Refining Segment and large investments in underperforming global pet-chem plants.
• Earlier this month, activist investor Elliott Management nominated seven directors to PSX's board and is lobbying to spin-off PSX's Midstream Segment to unlock shareholder value.
• PSX's Midstream Segment has shown strong growth and is its most consistent well-performing segment, enabling robust dividend growth since going public.
• I maintain a Hold rating for PSX due to limited downside, the attractive 3.64% dividend yield, and potential for continued strong dividend growth.

Most followers of Phillips 66 ( PSX ) already know that the company has become a target of corporate activist Elliott Management. Earlier this month, Seeking Alpha reported that Elliott had nominated seven directors for seats on PSX's board - continuing its pressure on PSX management. The upcoming shareholder vote will be a litmus test as to whether or not large institutional investors have become impatient with the PSX management's strategy to improve efficiency and the results of that strategy. As a long-term Phillips 66 shareholder (I received my shares by virtue of the spin-off from ConocoPhillips ( COP )), I welcome the pressure. That's because PSX has lagged its peer group for many years (see the five-year total returns chart below). That said, Phillips 66 has delivered very strong dividend growth since going public in 2012, and I suspect that will continue going forward (with or without Elliott's proposals). Today, I'll take a fresh look at Elliott's initiatives, PSX's response, and the late breaking news that Elliott filed litigation regarding t he board fight....

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