Activist investor Elliott Investment Management secured a significant victory in its proxy fight against Phillips 66. Institutional Shareholder Services (ISS), a leading proxy advisory firm, recommended that investors vote for all four of Elliott’s nominated board members. This decision significantly boosts Elliott’s chances of success in its campaign to influence strategic changes at the oil refiner.
Elliott, holding a substantial $2.5 billion stake in Phillips 66, has been pushing for the company to divest its midstream business. The support from ISS follows similar endorsements from Glass Lewis and Egan-Jones, strengthening the activist investor’s position ahead of the May 21 shareholder vote.
ISS’s recommendation carries significant weight, as its advice heavily influences major investors’ voting decisions. In its report, ISS challenged Phillips 66’s claim that its integrated strategy delivers superior returns. The firm pointed to the company’s underperformance relative to its peers since mid-2021, noting that the stock price has not recovered. This underperformance is underscored by the 18% drop in PSX shares over the past 52 weeks.
Elliott’s involvement in Phillips 66 began in February with the disclosure of its significant investment. This follows an earlier investment that secured a board seat for refining expert Robert Pease. The increased stake firmly places Elliott among Phillips 66’s top five shareholders.
This victory adds to Elliott’s impressive track record in the energy sector. The hedge fund, managing $70 billion in assets, has successfully invested in companies like Marathon Petroleum, NRG Energy, Suncor Energy, and Hess, demonstrating its expertise in the industry. Elliott declared that the ISS report fully validates its arguments for change at Phillips 66.
The outcome of this proxy fight will have significant implications for Phillips 66’s future strategic direction. With ISS’s backing, Elliott is well-positioned to push for its desired changes, potentially leading to a restructuring of the company’s midstream operations.
