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Buffett's Berkshire buys Phillips 66 unit for $1.4B

Warren Buffett's Berkshire Hathaway is buying a Phillips 66 subsidiary with approximately $1.4 billion worth of the oil company's own shares.

Berkshire reported owning about 27.1 million shares of Phillips 66 at the end of September. At today's closing price of $74.72, that stake is worth just over $2 billion.

A Phillips 66 filing said it will be getting approximately 19 million of those shares from Berkshire in exchange for Phillips Specialty Products, a unit that "focuses on the science of drag reduction, specializing in maximizing the flow potential of pipelines."

Warren Buffett, chairman and CEO of Berkshire Hathaway
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Warren Buffett, chairman and CEO of Berkshire Hathaway

In a Berkshire news release, Buffett is quoted as saying that he has been long "impressed by the strength of the Phillips 66 business portfolio."

He called the flow improver unit a "high-quality business with consistently strong financial performance" that will fit well with Berkshire's other businesses.

Buffett plans to have James Hambrick, CEO of Berkshire subsidiary Lubrizol, "oversee its strategic direction."

The companies say they expect the transaction to close in the first half of 2014, following regulatory review. The specific number of Phillips shares to be handed over will be based on the stock price when the deal closes.

Phillips said that it expects the unit to have roughly $450 million in cash on its balance sheet at closing.

—By CNBC's Alex Crippen. Follow him on Twitter: @alexcrippen

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