Occidental Petroleum Corporation (OXY) recently announced the purchase of Phibro LLC (Phibro) from Citigroup Inc. (C), for approximately the net asset value. Occidental plans to invest $250 million in Phibro. Phibro’s assets consist of cash, marketable securities and commodity positions.
Occidental will incorporate Phibro in its midstream segment, which includes its natural-gas liquids, power, pipeline and existing trading business. The deal is expected to close by year end 2009. Upon closing, Occidental will support the credit of Phibro.
Phibro’s management team, headed by Andrew Hall and its employees will be a part of the company after closing. The senior management team has agreed to make a significant investment in Phibro and receive returns dependent upon performance. Also, portions of current and future bonuses will be deferred and retained by Phibro and paid out in future years.
From 1997 until the second quarter of 2009, Phibro averaged approximately $200 million per year in pre-tax earnings. Over the last five years, Phibro’s earnings have averaged $371 million per year.
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