Report: Chevron to Buy Texaco

Chevron Corp. reportedly has reached a deal

to acquire Texaco Inc. for about $35.1 billion, creating the

world’s fourth-largest oil company.

The boards of both companies approved the transaction, The Wall Street Journal reported today, citing sources familiar with the matter. A formal announcement was expected Monday.

Chevron spokeswoman Bonnie Chaikind refused to comment on the report Sunday. Calls to Texaco were not answered; the company on Friday had refused to comment on reports of a deal.

According to the Journal, the combined company will be called Chevron Texaco, and Chevron’s top executive David O’Reilly will be chairman and chief executive officer of the new company, while Texaco CEO Peter Bijur will be vice chairman.

Under terms of the deal, Chevron will pay roughly 0.77 a share, worth $64.87 based on Friday’s closing price, for each share of Texaco. Chevron also will assume $7.5 billion of Texaco’s debt, the Journal reported.

The deal could require the companies to sell possibly thousands of gas stations in order to resolve regulatory issues, the Journal reported.

Among U.S. oil companies, Chevron currently is the third largest and Texaco is the second largest. A merger would put them among the ranks of other industry powerhouses formed by similar mergers, including Exxon Mobil Corp., Royal Dutch/Shell Group and BP Amoco Plc.

$1 Billion in Projected Savings

By combining forces, Chevron and Texaco could create as much as $1 billion in operational savings and would become more competitive in developing new oil and gas fields, The New York Times reported Sunday, citing executives familiar with the talks.

The deal would close the gap between the combined company and the largest U.S. oil company, Exxon Mobil Corp., which had 1999 sales of $160.9 billion. Chevron had 1999 sales of $31.5 billion, while Texaco had sales of $35 billion last year.

A proposed $37.5 billion deal between Chevron and Texaco unraveled last summer after Texaco basically rejected all aspects of Chevron’s offer. At the time, Texaco was seeking an offer in the area of $80 a share, while Chevron had offered around $70.