CHEVRON AND TEXACO AGREE TO $100
BILLION MERGER CREATING TOP-TIER INTEGRATED ENERGY COMPANY
ChevronTexaco Corp. to achieve annual savings of
at least $1.2 billion and create stronger, more competitive
company
SAN FRANCISCO and NEW YORK (October 16, 2000) — Chevron
Corporation [NYSE: CHV] and Texaco Inc. [NYSE: TX] today announced a
merger that will create a company — ChevronTexaco Corporation - that ranks with the world’s largest and most
competitive international energy companies.
The merger joins two leading energy companies and long-time
partners to create a U.S.-based, global enterprise that is highly
competitive across all energy sectors. ChevronTexaco will have
world-class upstream positions in reserves, production and
exploration opportunities; an integrated, worldwide refining and
marketing business; a global chemicals business; significant growth
platforms in natural gas and power; and industry leading skills in
technology innovation.
The combined company expects to achieve annual savings of at
least $1.2 billion within six to nine months of the merger’s
completion. The merger, to be accounted for as a pooling of
interests, is expected to become accretive to the new company’s
earnings and cash flow per share upon realization of the savings.
The company also expects to improve capital efficiency by funding
the best growth opportunities of Chevron and Texaco, resulting in
improved return on capital employed over time.
The new company will have reserves of 11.2 billion barrels of oil
equivalent (BOE), daily production of 2.7 million BOE, assets of $77
billion, and operations throughout the world. In the United States,
ChevronTexaco will be the nation’s third largest producer of oil and
gas, with production of 1.1 million BOE per day, and will hold the
nation’s third largest reserve position, with 4.2 billion BOE of
proved reserves.
In the merger, Texaco shareholders will receive .77 shares of
Chevron common stock for each share of Texaco common stock they own,
and Chevron shareholders will retain their existing shares. The
exchange ratio represents approximately $64.87 per Texaco share
based on Chevron’s closing stock price of $84.25 on October 13,
2000. The exchange ratio represents an 18% premium based upon
Texaco’s closing share price on October 13, and a 25% premium based
upon the two companies’ average relative share prices during the
30-day period through October 13. As a result of the merger, Chevron
shareholders will own approximately 61 percent of the combined
equity, and Texaco shareholders will own about 39 percent. The
combined company would have an enterprise value of more than $100
billion.
Dave O’Reilly, Chevron chairman and chief executive officer, will
serve as chairman and CEO of ChevronTexaco, which will be
headquartered in San Francisco. Peter Bijur, Texaco chairman and
CEO, will become a vice chairman of the combined company with
responsibility for downstream, power and chemicals operations.
Richard Matzke, Chevron vice chairman for upstream operations, will
retain those responsibilities in the combined company. The
composition of the ChevronTexaco Board of Directors will be
approximately proportional to the equity split and will be drawn
from current members of the Chevron and Texaco boards. Chevron Vice
President and Chief Financial Officer John Watson and Texaco Senior
Vice President and Chief Financial Officer Patrick Lynch will lead
the integration process.
"This merger positions ChevronTexaco as a much stronger
U.S.-based global energy producer better able to contribute to the
nation’s energy needs," said O’Reilly. "That’s good news for the
country because the United States will have an additional top-tier
energy company better positioned to compete effectively with the
international majors.
"ChevronTexaco," O’Reilly continued, "will create greater value
for the shareholders of both companies. We’ll be positioned for
stronger financial returns than could be achieved by either company
separately, partly through significant cost reductions, but mainly
because we’ll have a much broader mix of quality assets, skills, and
technology. We’re committed to being first in our industry in total
shareholder return, and this transaction will help us accomplish
that objective."
Bijur said: "These two companies form a powerful combination that
will have the strength and resources to compete and succeed around
the globe. Texaco and Chevron are natural partners, whose historic
relationship and operational fit are highly complementary. We know
each other well, and we already have long, highly productive
experience working together in both the upstream and downstream,
giving us an advantage in integrating the companies."
"We also share common values including protection of the
environment, active support for the communities where we operate,
and promoting diversity and opportunity in our workforce and among
our business partners," Bijur continued.
ChevronTexaco will be much stronger in several important
respects:
- Significant cost savings:
The new company expects to
reduce costs by at least $1.2 billion per year within six to nine
months of the merger’s completion. The historic associations and
strategic compatibility of Chevron and Texaco will enable rapid
integration of the two companies. The most significant savings
(approximately $700 million) will come from more efficient
exploration and production activities, but other areas will
contribute as well, including some $300 million from the
consolidation of corporate functions and $200 million from other
operations. The companies anticipate that the combined workforce
of about 57,000 will be reduced by approximately 7 percent
worldwide. Anticipated cost savings build on both companies’ track
records of successfully achieving cost reductions.
- Leadership position in upstream:
The combined company will
be a premier global upstream competitor, with a significantly
enhanced leadership position in most of the world’s major and
emerging exploration and producing areas. ChevronTexaco will have
world-class reserves and growth opportunities in both west Africa
and the Caspian region, where, in the latter case, the new company
will solidify its position as the largest producer. In addition,
the combined company will have a superior exploration acreage
position in the most promising deepwater areas in west Africa,
Brazil and the U.S. Gulf of Mexico. The combination will
significantly strengthen positions in core producing areas in
North America and the North Sea. Further, the combination will
create an outstanding portfolio of growth opportunities in Latin
America and the Asia-Pacific region.
- Worldwide downstream platform:
ChevronTexaco will create a
worldwide business built around the well-recognized, international
brands: Chevron, Texaco and Caltex. By integrating the operations
of Caltex, a 65-year international refining and marketing joint
venture between Chevron and Texaco, the combined company will be
able to realize efficiencies from streamlined decision-making and
management. The merger also allows an enterprise approach to
lubricants (including the well-known quality lubricants brands
Havoline and Delo), trading, international markets and customers,
and will expand on the existing fuels and marine marketing joint
venture. In addition, the merger enables the new company to use
its brand presence to help facilitate activities and new entries
in the upstream, and in gas and power businesses in Asia, Latin
America and Europe.
- Strength and scale in chemicals:
The chemicals business
of the combined company consists of Chevron’s recently formed
50/50 joint venture, Chevron Phillips Chemical Co. With more than
$6 billion in assets and $6 billion in revenues, Chevron Phillips
Chemical Co. has a strong, global position in olefins, polyolefins
and aromatics.
- Leadership position in power generation:
Texaco’s power
and gasification business, with equity interests in 3,500
megawatts of power operating or under construction, and Chevron’s
26 percent stake in Dynegy, Inc., give the combined company more
options in the fast-growing power and energy convergence
businesses.
- Broad technology portfolio:
The merger will strengthen the
new company’s leading technologies in its core businesses by
bringing together specialized expertise from the two companies.
The combined company will also have a broader portfolio in
advanced technologies, e-business ventures and alternate energy,
such as fuel cells and gas-to-liquids conversion.
- Superior organizational capability:
The capabilities of
the new company will be strengthened by the combination of people
from both Chevron and Texaco who have the diverse skills, talent
and vast experience to compete successfully in an increasingly
competitive industry. The merged company also gains an advantage
with proven leadership in many facets of the global, integrated
energy business and a track record of success in executing key
strategies.
The merger is conditioned, among other things, on shareholder
approval for both companies, pooling accounting treatment for the
merger and regulatory approvals of government agencies such as the
U.S. Federal Trade Commission. Chevron and Texaco anticipate that
the FTC will require certain divestitures in the U.S. downstream in
order to address market concentration issues, and the companies
intend to cooperate with the FTC in this process. In that regard,
Texaco is in discussions with its partners in the U.S.
downstream.
Lehman Brothers Inc. is acting as financial advisor to Chevron.
Al Pepin; Fried, Frank, Harris, Shriver & Jacobson; and
Pillsbury Madison & Sutro are acting as legal advisors to
Chevron. Credit Suisse First Boston and Morgan Stanley Dean Witter
are acting as financial advisors; and Davis Polk & Wardwell;
Howrey, Simon, Arnold & White; and Weil Gotshal & Manges are
acting as legal advisors to Texaco.
Chevron Corp. is involved in every aspect of the oil and gas
industry, from exploration and production to transportation,
refining and retail marketing, as well as chemicals manufacturing
and sales. It is active in nearly 100 countries and employs about
31,000 people worldwide.
Texaco Inc. is a fully integrated energy company engaged in
exploring for and producing oil and natural gas; manufacturing and
marketing high-quality fuels and lubricant products; operating
trading, transportation and distribution facilities; and producing
power. Directly and through affiliates, Texaco operates in more than
150 countries.
Private Securities Litigation Reform Act Safe Harbor
Statement
Except for the historical and present factual information
contained herein, the matters set forth in this press release,
including statements as to the expected benefits of the merger such
as efficiencies, cost savings, market profile and financial
strength, and the competitive ability and position of the combined
company, and other statements identified by words such as "expects,"
"projects," "plans," and similar expressions are forward-looking
statements within the meaning of the "safe harbor" provisions of the
Private Securities Litigation Reform Act of 1995. These
forward-looking statements are subject to risks and uncertainties
that may cause actual results to differ materially, including the
possibility that the anticipated benefits from the merger cannot be
fully realized, the possibility that costs or difficulties related
to the integration of our businesses will be greater than expected,
the impact of competition and other risk factors relating to our
industry as detailed from time to time in each of Chevron’s and
Texaco’s reports filed with the SEC. Chevron and Texaco disclaim any
responsibility to update these forward-looking statements.
Additional Information
Chevron and Texaco will file a proxy statement/prospectus and
other relevant documents concerning the proposed merger transaction
with the SEC. Investors are urged to read the proxy
statement/prospectus when it becomes available and any other
relevant documents filed with the SEC because they will contain
important information. You will be able to obtain the documents
free of charge at the website maintained by the SEC at www.sec.gov.
In addition, you may obtain documents filed with the SEC by Chevron
free of charge by requesting them in writing from Chevron
Corporation, 575 Market Street, San Francisco, CA 94105, Attention:
Corporate Secretary, or by telephone at (415) 894-7700. You may
obtain documents filed with the SEC by Texaco free of charge by
requesting them in writing from Texaco Inc., 2000 Westchester
Avenue, White Plains, New York 10650, Attention: Secretary, or by
telephone at (914) 253-4000.
Chevron and Texaco, and their respective directors and executive
officers, may be deemed to be participants in the solicitation of
proxies from the stockholders of Chevron and Texaco in connection
with the merger. Information about the directors and executive
officers of Chevron and their ownership of Chevron stock is set
forth in the proxy statement for Chevron’s 2000 Annual Meeting of
stockholders. Information about the directors and executive officers
of Texaco and their ownership of Texaco stock is set forth in the
proxy statement for Texaco’s 2000 Annual Meeting of stockholders.
Investors may obtain additional information regarding the interests
of such participants by reading the proxy statement / prospectus
when it becomes available.
Investors should read the proxy statement/prospectus carefully
when it becomes available before making any voting or investment
decisions.
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