Phillips 66 agreed to buy the remaining Phillips 66 Partners units the Houston-based refiner does not already own in an all-stock transaction valued at $3.4 billion.

“We believe this acquisition will allow both PSX shareholders and PSXP unitholders to participate in the value creation of the combined entities, supported by the strong financial position of Phillips 66,” commented, Greg Garland, chairman and CEO of Phillips 66, in a company release.

Phillips 66 Partners is an MLP formed by Phillips 66 to own, operate, develop and acquire primarily fee-based crude oil, refined petroleum products and natural gas liquids pipelines, terminals and other midstream assets. The company began trading on the New York Stock Exchange in July 2013.

The Phillips 66 transaction marks the latest in a series of MLP roll-ups involving pipeline firms, which have been forced to restructure in recent years after U.S. regulators said they will no longer be allowed to recover an income tax allowance as part of fees they charge to shippers under a “cost-of-service” rate structure. Previously, the oil and gas industry had financed billions of dollars in pipeline and storage products as MLPs.

“The Phillips 66 Complex has been frustrated with the midstream valuation and acknowledged the environment has shifted dramatically since the MLP was first conceived,” Spiro Dounis, analyst at Credit Suisse, said in a note, according to a Reuters report.

The Phillips 66 agreement offers each outstanding Phillips 66 Partners common unitholder 0.50 shares of Phillips 66 common stock for each Phillips 66 Partners common unit. The Phillips 66 Partners’ preferred units would be converted into common units at a premium to the original issuance price prior to exchange for Phillips 66 common stock, according to the company release.

Upon closing, expected first-quarter 2022, Phillips 66 Partners will be a wholly owned subsidiary of Phillips 66 and will no longer be a publicly traded partnership.

Citi and BofA Securities Inc. are financial advisers to Phillips 66, and Latham & Watkins LLP is its legal adviser.

The terms of the transaction were unanimously approved by the board of directors of the general partner of Phillips 66 Partners based on the unanimous approval and recommendation of its conflicts committee, comprised entirely of independent directors. The conflicts committee engaged Evercore as its financial adviser and Vinson & Elkins LLP as its legal adviser.

Phillips 66 Project Development Inc., a wholly owned subsidiary of Phillips 66 and the holder of a majority of the outstanding common units of Phillips 66 Partners, has also voted its units to approve the transaction.

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