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Oil firms in chemical link
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February 7, 2000: 9:01 a.m. ET
Chevron, Phillips petrochemical joint venture will pay parents $800M each
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NEW YORK (CNNfn) - Chevron Corp. and Phillips Petroleum Co. are combining their petrochemical units into a joint venture that will pay the parent companies $800 million each.
The companies said Monday that cost savings from the deal are expected to be $150 million annually, as it cuts 600 jobs, or about 10 percent of the work forces, of the two units. The two chemical companies had combined revenue last year of $6 billion, and will have assets worth $6 billion.
The new company -- whose creation has been speculated since last fall -- will be among the world's five largest manufacturers in the aromatics and styrene businesses, as well as olefins and polyolefins, which are used in the manufacture of basic chemicals and plastics.
The joint-venture company will arrange $1.6 billion of debt financing to make the one-time cash payments to each parent at or shortly after closing.
Chevron (CHV: Research, Estimates) had 1999 revenue of $36.4 billion, while Phillips (P: Research, Estimates) had revenue of $14 billion.
Jim Gallogly, Phillips' senior vice president of chemicals, will be president and chief executive of the joint venture and a non-voting member of its board. Kent Potter, vice president of finance for Chevron Overseas Petroleum Inc., is to be its chief financial officer.
Chevron and Phillips will each make two more appointments to the senior management team, including the chief operating officer, who will also be a non-voting member of its board. Two executives each from Chevron and Phillips will fill-out the six-member board.
The company said Chevron's Oronite additives business, which holds a global leadership position in development, manufacture and marketing of fuel and lubricant additives, will not be included in the joint venture because it did not mesh with Phillips' operations.
In trading Friday, shares of Chevron fell 2-7/8 to close at 78-9/16, while shares of Phillips slipped 3/8 to 39. 
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