By the OGJ Online Staff
HOUSTON, Oct. 9 -- Shell Oil Co. said Tuesday it has signed a deal to buy Texaco Inc.'s 44% share of Equilon Enterprises LLC, making it the 100% owner.
The deal also provides that Shell and Saudi Refining Inc. (SRI) will acquire Texaco's 35% share of Motiva Enterprises LLC, making each a 50% holder in Motiva. Shell has 30% of Motiva and SRI has 35%.
The US Federal Trade Commission had required Texaco to divest the holdings as a condition of its $35 billion merger with Chevron Corp. (OGJ Online, Sept. 10, 2001).
The two transactions are comprised of $2.1 billion in cash, $1.4 billion in debt, and $300 million in pension liabilities. They are expected to conclude by yearend.
Paul Skinner, a Royal Dutch/Shell Group managing director and CEO of the group's oil products business, said, "The acquisition of the Texaco interests will strengthen our excellent market position, based on a strong brand, and afford us the opportunity to achieve additional synergies with the group's global businesses and networks."
Shell said synergies and cost reductions from the acquisition are estimated at $400 million/year by 2004. There will be restructuring costs of $100 million and rebranding costs of $500 million associated with the Shell and Texaco networks over 4 years. The transaction will be accretive to earnings from 2002.
Under deals, Equilon and Motiva will have exclusive use of the Texaco brand for the marketing of products and services at Texaco branded locations until June 2004 and then on a nonexclusive basis until June 2006. A nonexclusive right to the Havoline lubricants brand will exist for 18 months.
Shell Oil Co. Chairman, President and CEO Steven Miller said, "The acquisition of the Texaco interests is of strategic importance to Shell in the US. Our joint venture in Motiva with SRI remains a strategic complement to Shell's total US oil products portfolio.
"While there will be some staff reduction initially, employees will have enhanced opportunities to contribute and grow in a simpler, more efficient organization."
Under the deal, Shell would waive its change-of-control purchase provision of Texaco's 45% interest in the Malampaya field development project in the Philippines. Shell is operator of that project.
Motiva operates primarily in the eastern US and includes 4,800 Shell-branded gasoline stations and 8,200 Texaco-branded stations, and four refineries and a network of terminals. In July 1998, Shell's eastern and Gulf Coast refining and marketing businesses were combined with similar operations owned by Star Enterprise, a joint venture between Texaco and SRI, through the formation of Motiva.
Equilon operates primarily in the western US, and includes 4,500 Shell-branded gasoline stations and 4,500 Texaco-branded stations, four refineries, a lubricants business, and an extensive pipeline and terminal network. Equilon was formed in January 1998, when Shell's western and midwestern refining, marketing, trading, transportation, and lubricants businesses were combined with similar operations of Texaco.
