Chevron to Buy Texaco in $35 Billion Deal
S A N F R A N C I S C O, Oct. 16, 2000 -- Chevron is acquiring Texaco for$35 billion, creating the world’s fourth-largest oil company.
The combined company will be called ChevronTexaco Corp., andjoins the ranks of other industry powerhouses formed by similarmergers: ExxonMobil, Royal Dutch/Shell Group and BP AmocoBP Amoco.
The boards of both companies approved the transaction on Sundayand made the announcement early this morning.
No. 4 in the World
The latest proposed deal unites the No. 2 and No. 3 U.S. oilcompanies to create the world’s fourth-largest producer of oil andgas. A combined Chevron and Texaco would have $66.5 billion inrevenue, based on 1999 figures.
Chevron’s top executive David O’Reilly, 53, will be chairman andchief executive officer of ChevronTexaco, which will be based inSan Francisco, while Texaco CEO Peter Bijur, 58, will be vicechairman.
“This merger positions ChevronTexaco as a much strongerU.S.-based global energy producer better able to contribute to thenation’s energy needs,” said O’Reilly.
Under terms of the deal, Chevron will pay roughly 0.77 of one ofits shares, worth $64.87 based on Friday’s closing price, for eachshare of Texaco — an 18 percent premium. Chevron also will assumeroughly $8 billion of Texaco’s debt.
Shares of Texaco closed down $1.88 to $51.13 in trading Fridayon the New York Stock Exchange, where shares of Chevron were down$3.06 to $84.25.
Closing the Oil Gap
Chevron, based in San Francisco, and Texaco, based in WhitePlains, N.Y., had talked of a marriage last year, but thosediscussions broke off over price.
The deal would close the gap between the combined company andthe largest U.S. oil company, Exxon Mobil Corp., which had 1999sales of $160.9 billion. Chevron had 1999 sales of $31.5 billion,while Texaco had sales of $35 billion last year.
Some 4,000 jobs, or 7 percent of the 57,000 combined jobs atChevron and Texaco, will be eliminated as a result of the deal,which will result in annual savings of $1.2 billion, the companiessaid.
Chevron and Texaco still need to get approval from theirrespective shareholders as well as federal regulators.
Antitrust concerns are likely to be raised regarding the mergerbecause the combined company would have an interest in roughly 40percent of the retail gasoline market and one-third of refiningcapacity on the West Coast.
Exxon agreed in 1998 to acquire Mobil for $81 billion, combiningthe biggest U.S. oil companies and reuniting two of the biggestpieces left by the 1911 government breakup of John D. Rockefeller’sStandard Oil empire.
That deal was approved last November.