Chevron and Texaco Merge in $US35 Billion Deal, Creating Oil Giant

Strategic Insights -

The proposed acquisition of Texaco by Chevron Corp, two of the world's largest oil companies, has sent shockwaves through the industry. In a deal worth $US35 billion, Chevron, the world's fifth-largest commercial oil company, will purchase Texaco, the seventh-largest, in a stock transaction that will create a behemoth rival to Exxon Mobil, BP Amoco, and Royal Dutch/Shell.

Key Takeaways:

  • The combined company will have an enterprise value of approximately $US100 billion and reserves of 11.2 billion barrels of oil equivalent (boe).
  • The deal is expected to result in 4000 job cuts, representing 7% of the combined workforce of 57,000.
  • Chevron plans to shave $US1.2 billion from the combined company through cost savings and redundancies.
  • The transaction values Texaco at $US64.87 a share, a premium to its closing price on Friday of $US55.125 on the New York Stock Exchange.
  • Chevron will assume about $US7 billion in Texaco debt and exchange a fixed 0.77 share for each of Texaco's approximate 545 million outstanding shares.
  • The merger will strengthen Chevron's presence in the US oil market and create a majority interest in the giant offshore West Australian Gorgon gas field.
  • Caltex, a subsidiary of Chevron, will continue to own and operate two of Australia's eight oil refineries and control about a quarter of the retail petrol market.

Statistics:

  • The combined company will have daily production of 2.7 million boe, ranking it fourth largest behind Exxon Mobil, Shell, and BP.
  • The transaction values Texaco at a premium of $US9.72 per share, a significant increase from the $US55.125 closing price on Friday.
  • The streamlined company will have a combined workforce of 57,000, with the potential for significant cost savings and redundancies.
  • Chevron's acquisition of Texaco will create a major player in the global oil market, rivaling the likes of Exxon Mobil and Royal Dutch/Shell.

Sources:

  • "Chevron to acquire Texaco in $35 billion deal." (The Australian)
  • "Chevron to slash jobs in Texaco deal." (The Sydney Morning Herald)