Why now is a good time for Chevron to acquire the 50% stake in CPChem that it does not already own?

Tracing its roots to the invention and commercialization of High-Density #Polyethylene and #Polypropylene in the 1950’s, Chevron Phillips Chemical (CPChem) was launched as a 50/50 Joint-Venture in 2000 between Chevron U.S.A. and Phillips 66 company.

Since inception, CPChem has had much success, self-funding a growing asset base from 6 G$ in 2000 to more than 20 G$ by the end of 2024. Along the way, both partners have indicated that the JV is a prized asset.

So why now is an opportune time for Chevron to fully acquire CPChem?

Reason #1: Motivated seller.

Since November 2023, Phillips 66 has been engaged with an activist investor (Elliott) who is pushing for improved operations. In its most recent letter to the Phillips board, Elliott has proposed the sale of the Chemicals asset and put a valuation of 15 G USD on that business.

Reason #2: Time in the cycle.

The integrated polyethylene chain, the core business of CPChem, is heading into a deepening bottom-of-cycle with the threat of trade wars and global recessions worsening profitability in the short and medium term. This is starting to be reflected in CPChem’s earning as evidenced by the results in Q1 (Chart below).

With a more motivated seller and a squeeze on company profitability, now is Chevron’s chance to pick up the rest of CPChem at a reasonable price.

Contact BIC Advisory Group for assistance in unlocking the opportunities coming out of a deepening Bottom-Of-Cycle in the hashtag#chemicalindustry.