Chevron, Texaco Join Latest Merger Ranks

Published October 17th, 2000 - 02:00 GMT

U.S. oil major Chevron Corp. formally announced on October 16th its plans to purchase Texaco, Inc. in a $35 billion stock deal aimed at competing more aggressively with other industry heavyweights.  


After months of speculation that Chevron was courting Philips Petroleum Corp., the nation’s second-largest oil company resurrected merger talks with Texaco that had been shelved in June 1999 when the nation’s third-largest oil company called Chevron’s offer “unacceptable in all respects.”  


Under the new deal, Chevron will exchange 0.77 share for each of Texaco’s 545 million outstanding shares, valuing the White Plains, N.Y.-based company at $64.87 per share.  


The combined company, to be named Chevron Texaco Corp., will have 8.26 trillion barrels of oil and gas reserves and 2.71 million b/d of oil equivalent production, making it the fourth largest global energy company in reserves behind Exxon Mobil, Royal Dutch/Shell and BP Amoco.  


In terms of market capitalization, the company will be valued at $90 billion, using the $35 billion value of the deal and Chevron’s $55 billion value at its closing share price of $84.25 on October 13th, making it the fifth largest behind TotalFinaElf in financial terms.  


The merger is likely to raise monopoly concerns in the U.S. West Coast region, where consumers already pay among the highest fuel prices in the country. 


The new company will be headed by Chevron Chairman and chief executive officer (CEO) Dave O’Reilly, with Texaco Chairman and CEO Peter Bijur as vice chairman, responsible for refining and marketing operations, power and chemicals. Chevron expects $1.2 billion in cost savings from the deal, which will result in about 4,000 job cuts.  


O’Reilly indicated that the merged company would take about $1 billion in charges over the staff reduction and other expenses and that the new firm will be able to reduce costs above and beyond its $1.2 billion target.  



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