Texaco Refuses to Boost Takeover Offer Amid Rival Bid

Strategic Insights -

Texaco Inc., the US oil giant, has announced that it will not increase its $27 million takeover offer for its Canadian subsidiary, Texaco Canada Petroleum Inc., despite a rival bid from Canadian 88 Energy Corp. The company's bid of $1.01 per share for the 27.7 million shares it does not already own has been deemed inadequate by minority shareholders, who believe the company is worth at least twice the offered price. With Canadian 88 owning 9.7% of Texaco Canada and minority shareholders holding 4 million shares, it appears unlikely that Texaco will meet the minimum requirement of 14 million shares, representing about 11%, to complete the takeover.

Key Takeaways:

  • Texaco Inc. has refused to increase its $27 million takeover offer for Texaco Canada Petroleum Inc., despite a rival bid from Canadian 88 Energy Corp.
  • The rival bid of $1.17 per share from Canadian 88 has increased the interest in Texaco Canada, making it harder for Texaco to secure the necessary shares for the takeover.
  • Minority shareholders, who own approximately 4 million shares, are adamant that the company is worth at least twice the offered price of $1.01 per share.
  • The Calgary-based company, established in 1989, is critical to Texaco's global operations, with the takeover offer representing about 0.73% of Texaco's annual earnings of $37 billion.
  • Canadian 88 has denied allegations of "greenmail," insisting that its investment in Texaco Canada is strategic rather than an attempt to pressure Texaco into increasing its offer.

Statistics:

  • Texaco's offer of $1.01 per share is a 10% premium to the current stock price of $1.10 per share.
  • The minority shareholders' estimated valuation of Texaco Canada is a minimum of $2 per share.
  • Canadian 88 Energy Corp.'s ownership in Texaco Canada has increased to 9.7% from 8.7%.
  • The total number of shares required for the takeover is 14 million, representing about 11% of Texaco Canada's outstanding shares.
  • The global annual earnings of Texaco are $37 billion, with the takeover offer representing about 0.73% of this amount.

Sources:

  • "Texaco Refuses to Boost Offer After Rival Bid."
  • CNBC Radio News, July 1995.
  • Company press release, David Dickson, Texaco spokesman.