COSTA MESA — As many as 550 workers--about half of them in Orange County--will lose their jobs at 76 Products when it is taken over later this month by the company that owns Circle K convenience stores, an executive said Monday.
76 Products President Lawrence Higby said Tosco Corp. will shift his company's headquarters to Phoenix, although several hundred people will likely remain at the state-of-the-art, high-rise office building here.
Some of the job losses are voluntary, Higby said. Tosco offered work to about 100 employees--including Higby. They declined, he said, because they didn't want to relocate to Phoenix. Higby will continue with Tosco temporarily under a consulting contract.
Tosco officials declined Monday to comment on Higby's remarks, saying the acquisition isn't scheduled to close until the end of the month.
"I'd not be comfortable commenting on something affecting employees that are not yet ours," said Jefferson Allen, Tosco's chief financial officer."
In all, 76 Products has 3,600 employees. The company, a subsidiary of El Segundo-based Unocal Corp., operates three oil refineries, a network of 1,300 service stations in six states, a fleet of three oceangoing oil tankers and a bulk oil storage and pipeline system.
The $2-billion sale to Tosco was arranged late last year after Unocal said it planned to spin off 76 Products in a public offering.
"That put us into play and prompted a pretty close inspection of our operation by others," Higby said in a recent interview.
Tosco offered at least $300 million more than a public stock offering would have generated. It was "a cash offer that was pretty easy" for Unocal to accept, Higby said.
Higby acknowledges that he and others at 76 Products would have preferred the public offering. The sale to Tosco "was a temporary disappointment," says the former Pepsico and Los Angeles Times executive, who likely would have remained president if 76 Prducts had gone public.
Still, he says that the marriage of Tosco and 76 Products is a smart one that will create a "very strong marketing organization."
Tosco likely will place Circle K convenience stores in many of 76 Products' service stations and change the brand of gasoline now sold at many Circle Ks to Unocal. Ultimately, Higby said, the company plans to drop the Unocal name and return to the old "Union 76" identity because parent Unocal Corp. doesn't want to change its name.
Unocal has said it will use proceeds from the sale of its refinery and retailing operations to pump up its petroleum exploration and oil drilling operations in the Far East.
The deal still must receive federal approval--a hurdle neither side sees as an impediment. When the purchase is completed, Tosco will become the nation's largest independent oil refiner, with daily capacity of nearly 1 million barrels.
Formerly a loss-laden oil shale refiner in Santa Monica, Tosco moved to Stamford, Conn., in 1990. Under chief executive Thomas D. O'Malley, the company then began buying up other money-losing refineries. Through penny-pinching management and keen marketing, it has since become a Wall Street star, turning twice the profits of other oil refiners.
Since the 76 Products deal was announced Nov. 18, Tosco stock--adjusted for a 3-for-1 split in February--has risen by nearly 17.5%. It closed at $28.375 a share Monday, up 37.5 cents on the New York Stock Exchange.
The rise in profits--and stock value--occurred because Tosco was able to buy refineries cheap and then pare operating costs, including payroll, to the bone.
At first blush, though, that doesn't seem the case with 76 Products. The first round of payroll trimming hasn't been drastic.
In addition to the 100 or so people leaving on their own, Tosco will lay off about 450 other workers when the sale is completed, said Higby. He said the numbers "at this point are just an educated estimate. [Tosco's] employment offers are just now going out."
The job cuts "aren't as bad as some of us thought they'd be when this deal was first announced," said one 76 Products executive who asked not to be identified.
76 Products will become part of Tosco's national marketing subsidiary, which moved to Phoenix last year when Tosco bought the Circle K chain.
Higby said that most of the layoffs to come with the 76 Products acquisition will come "because of redundancies. They already have a big marketing department and a big accounting department, so they don't need to take all of ours."
He said the Orange County Business Council tried to persuade Tosco to keep the headquarters in Costa Mesa but was unsuccessful.
Tosco, however, probably will keep several floors of the 12-story Costa Mesa headquarters that Unocal recently spent $15 million to refurbish and outfit with the latest in computer and telecommunications equipment. 76 Products signed a 10-year lease on the building and moved in just 14 months ago.