Royal Dutch/Shell Group agreed Tuesday to buy Texaco Inc. out of their two oil-refining joint ventures for $2.1 billion in a transaction that would make Shell the largest U.S. gasoline retailer.
The deal, completed after nearly a year of negotiations, also served to eliminate the last hurdle to Texaco's acquisition by Chevron Corp. Shareholders of both companies voted later in the day to approve the $38.6-billion merger to create ChevronTexaco Corp., which will become the world's fourth-largest publicly traded oil company.
The Federal Trade Commission required the sale of Texaco's stakes in the joint ventures as a condition of its recent approval of the Chevron-Texaco merger pact, which was announced a year ago.
Under the deal disclosed Tuesday, Shell Oil Co. and partner Saudi Refining Inc. are buying the Texaco stakes and will assume responsibility for about $1.7 billion in debt and other liabilities.
Once the transaction is complete, Shell will sell almost one of every six gallons of gasoline nationwide and control 22,000 gas stations, the company said.
Paul Skinner, head of Shell's fuel business, said the company would surpass Exxon Mobil Corp. and BP of Britain in the key U.S. market, which consumes more than $500 million of gasoline a day. The acquisition would lead to savings of $400 million by 2004, in part by cutting 10% of 12,000 jobs in the current joint ventures, Shell said.
"If they can achieve $400 million of cost savings, that is truly awesome," said Steve Turner, an analyst at Commerzbank Securities in London. "That's what would make it a good deal for them."
Shell will buy Texaco's 44% stake to gain sole ownership of Equilon Enterprises, which operates about 4,500 Shell stations and 4,500 Texaco stations, primarily in the Western United States.
Equilon, formed in 1998, has a nearly 15% share of the California gasoline market, placing it third behind BP's Arco brand, with 29%, and Chevron, with 19%. Equilon also operates four refineries, a lubricants business and a pipeline and terminal network.
The other divestiture will give Shell and Saudi Refining Inc., a subsidiary of Aramco Services Co., equal interest in Motiva Enterprises; at present, Shell holds 30% and Saudi Refining 35%. Motiva, likewise formed in 1998, operates mostly in the East and includes nearly 4,800 Shell stations and about 8,200 Texaco stations, four refineries and a network of terminals.
Shell and Motiva will gain sole use of the Texaco brand for selling fuel and other products at Texaco sites through June 2004 and then on a nonexclusive basis for two additional years, Shell said.
Chevron shares rose $1.94 to close at $90.89 on the New York Stock Exchange, where shares of Texaco gained $1.42 to $69.75.
Bloomberg News and Associated Press were used in compiling this report.