| Item 1.01. | Entry Into a Material Definitive Agreement. |
On January 6, 2025, Phillips 66 Company, a Delaware corporation (“P66”) and a wholly owned subsidiary of Phillips 66, a Delaware corporation (the “Company”), entered into an Equity Purchase Agreement (the “Purchase Agreement”) with SCM EPIC, LLC, a Delaware limited liability company (“SCM EPIC”), Dos Rios Y-Grade Holdings LLC, a Delaware limited liability company (“Dos Rios”), and EPIC Y-Grade Holdings, LP, a Delaware limited partnership (“Y-Grade Holdings”, and together with SCM EPIC and Dos Rios, collectively, the “Sellers”). Pursuant to the Purchase Agreement, P66 agreed to purchase from the Sellers all of the issued and outstanding equity interests in each of EPIC Y-Grade GP, LLC, a Delaware limited liability company (“Y-Grade GP”), and EPIC Y-Grade, LP, a Delaware limited partnership (“Y-Grade LP” and, together with Y-Grade GP and their respective subsidiaries, the “Target Companies”), which own various long haul natural gas liquids pipelines, fractionation facilities and distribution systems, for a base purchase price of $2.2 billion in cash (the “Transaction”). The base purchase price is subject to customary adjustments related to cash, indebtedness, working capital and transaction expenses of the Target Companies, as well as an adjustment based on the amount by which capital expenditures for certain pipeline expansion work exceed or fall short of the amount funded by P66 for such expenditures. P66 expects to fund the Transaction with cash on hand, including from the proceeds of recently announced asset dispositions, and short-term debt, if necessary.
The completion of the Transaction is subject to satisfaction or waiver of certain customary mutual closing conditions, including the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”).
The Purchase Agreement contains customary representations and warranties of P66, the Sellers, and the Target Companies, subject to customary materiality qualifiers as described in further detail in the Purchase Agreement.
The Purchase Agreement contains customary termination rights for each of P66 and the Sellers, including, among others, (a) by P66 or Y-Grade Holdings if the consummation of the Transaction does not occur on or before April 6, 2026 (subject to an automatic extension to July 6, 2026 under certain circumstances relating to the failure to receive regulatory approvals or the existence of antitrust-related laws or orders preventing closing), (b) by P66 or Y-Grade Holdings if any final and non-appealable order or law is in effect enjoining or preventing the consummation of the Transaction or making the consummation of the Transaction illegal, (c) by P66 or Y-Grade Holdings if the other party has breached its representations or warranties or failed to perform its covenants in a way that prevents satisfaction of a closing condition (subject to a cure period), or (d) by Y-Grade Holdings if, among other things, all conditions to closing have been satisfied or waived (except for those conditions that by their nature are to be satisfied at closing), Y-Grade Holdings has confirmed in writing that the Sellers are ready, willing and able to consummate the Transaction and P66 fails to consummate the Transaction within five business days of receipt of such notice.
The foregoing description of the Purchase Agreement and the transactions contemplated thereby in this Current Report on Form 8-K is only a summary and does not purport to be complete and is qualified in its entirety by reference to the full text of the Purchase Agreement, a copy of which is filed as Exhibit 2.1 hereto and incorporated by reference herein.
The Purchase Agreement has been included to provide investors with information regarding its terms. It is not intended to provide any other factual information about the Company, P66, any of the Sellers, or the Target Companies. The representations, warranties and covenants contained in the Purchase Agreement were made only for purposes of the Purchase Agreement as of the specific dates therein, were solely for the benefit of the parties to the Purchase Agreement, may be subject to limitations agreed upon by the contracting parties, including being qualified by confidential disclosures made for the purposes of allocating contractual risk between the parties to the Purchase Agreement instead of establishing these matters as facts, and may be subject to standards of materiality applicable to the contracting parties that differ from those applicable to investors. Investors are not third-party beneficiaries under the Purchase Agreement and should not rely on the representations, warranties and covenants or any descriptions thereof as characterizations of the actual state of facts or condition of the parties thereto or any of their respective subsidiaries or affiliates. Moreover, information concerning the subject matter of representations and warranties may change after the date of the Purchase Agreement, which subsequent information may or may not be fully reflected in the Company’s public disclosures.
