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ARCO buys Union Texas
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May 4, 1998: 10:09 a.m. ET
Oil, gas producer acquired for $3.3 billion, or $29 a share, in cash
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NEW YORK (CNNfn) - Atlantic Richfield Co. said Monday it agreed to acquire Union Texas Petroleum Holdings Inc., one of the nation's largest independent oil and gas producers, for about $3.3 billion.
Under the definitive agreement, holders of the Houston-based exploration company will receive $29 a share cash, representing a premium of 41 percent over Friday's closing stock price.
Shares of Union Texas (UTH) were delayed for trading early Monday after closing Friday at 20-1/2. ARCO's stock (ARC) was down 3/4 at 79-11/16 in early Monday trading.
In addition, ARCO already has obtained approval from Union Texas Petroleum's largest shareholder, Kohlberg Kravis Roberts & Co., which has agreed to tender its 25.6 percent stake in favor of the deal.
The agreement also was approved unanimously by the boards of both companies. Officials were quick to point out that the two companies have overlapping assets.
"Over 90 percent of Union Texas' assets are located in ARCO's core producing areas, specifically Venezuela, Indonesia, the North Sea and Alaska," ARCO Chairman and Chief Executive Mike R. Bowlin said.
In a statement, Bowlin said he expects the combination eventually to yield after-tax cost savings of at least $85 million annually.
The transaction immediately will add 140,000 barrels per day of oil equivalent to ARCO's production and 573 million barrels of proved reserves.
Bowlin said he expects the acquisition to add to operating cash flow in the first year and only modestly dilute earnings through next year.
ARCO expects the tender offer will be completed by the end of the company's second quarter. ARCO plans to finance the transaction using commercial paper and other short-term borrowings backed by existing and additional bank facilities.
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ARCO
Union Texas Pete
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