Updated from 9:23 a.m. ET with Robert Willens comment, opening share prices and additional information throughout
Yes, folks that's not a typo.
The Oracle of Omaha is using a piece of his over 4.5% holding in Phillips 66 shares to buy the company's Phillips Specialty Products unit, which optimizes the flow of oil and gas through pipelines. For Buffett, the deal appears to be another bet on the logistics surrounding a surge in onshore oil and gas drilling across the U.S.
Berkshire's biggest-ever acquisition, its over $30 billion takeover of railroad Burlington Northern Santa Fe, also is profiting from an energy boom within the continental United States. BNSF railcars have been among the biggest transporters of oil and gas in the U.S. given the still-limited pipeline access to many promising shale basins. At Berkshire's annual shareholder meeting, Buffett said Berkshire Hathaway has been lucky that so much oil has been found near BNSF track.
Buying Phillips Specialty Products Inc. (PSPI) is another oil transportation bet, but this time with pipelines. The business appears to concentrate on improving the performance of existing pipelines, obviously with the end-goal of increasing transport.
What is most interesting in the deal, announced after the market close on Monday, however, is how Buffett will be acquiring PSPI from Phillips 66.
Instead of dipping into Berkshire Hathaway's war-chest of cash, the insurance conglomerate will simply be handing over approximately 19 million of its shares in Phillips 66, worth about $1.4 billion as of Monday's close. At current share prices, that also amounts to about 70% of Berkshire's 4.53% stake in the midstream energy giant.