Chevron Corp's US$45.8 billion purchase of Texaco Inc may be approved by the Federal Trade Commission as soon as next week, creating the fifth largest investor-owned oil company, people familiar with the case said.
The companies said earlier this month they reached agreement with the FTC staff for Texaco to sell stakes in two US joint marketing and refining ventures formed in 1998 with Royal Dutch/Shell Group and Saudi Arabian Oil Co. The ventures sell gasoline at 22,000 Shell and Texaco service stations in the US.
The commissioners usually accept staff recommendations, particularly when agency lawyers have negotiated divestitures. The agreement lets Texaco place stakes in both joint ventures in a trust if it can't agree with Shell on a purchase price before the merger takes place, the companies said.
In approving a string of oil mergers in the last two years, the FTC has recognized that benefits of size may outweigh possible harm of reduced competition, experts said.
"The FTC is well aware that a billion-dollar project is not going to be tackled by a company with a capitalization of US$500 million," said Fadel Gheit, an oil industry analyst with Fahnestock & Co. "You need big companies in order to make the big discovery or build the big pipeline."
Chevron spokesman Fred Gorell said the company expects the FTC to decide on the takeover in time for shareholder approval of the deal Oct. 9. "We certainly have been working very closely with them providing all the information they requested," he said.
The FTC had no comment.
Shares gain
Chevron shares rose US$0.39 to US$90.86 on Friday while Texaco shares, which have risen 18 percent since the buyout was announced last October, climbed US$0.40 to US$69.35 in afternoon trading.
Texaco also agreed to sell stakes in US natural-gas processing and transport and fuel outlets for small aircraft, the companies said.
Texaco owns 44 percent of Equilon Enterprises LLC, formed by Shell and Texaco in 1998 to serve the US Midwest and West, and 31 percent of Motiva Enterprises LLC, a joint venture with Shell and Saudi Oil that operates in the East and South.
The agreement gives the trustee eight months to sell the Texaco refining and marketing assets for the best price, people familiar with the FTC review said. The assets include six Texaco oil refineries in the joint ventures.
Negotiations between Shell and Texaco are continuing and could still be completed under terms of the 1998 joint ventures, one person said.
The proposed agreement would let either partner buy Texaco's stake at a 10 percent discount, the person said. The value of Texaco's Equilon-Motiva holdings would be determined by taking the average of several investment banking assessments.
At the time it approved the joint ventures, the FTC required divestiture of a Shell refinery in Anacortes, Washington, and service stations in California and Hawaii.
While the FTC usually insists upon upfront divestitures, the trustee arrangement may work because the Texaco assets are already managed by the Equilon and Motiva operating companies, analysts say.
The European Commission approved the Chevron-Texaco deal in March.
Despite concerns about the impact on competition, the FTC in the last two years approved the formation of Exxon Mobil Corp, British Petroleum's acquisition of Amoco Corp and BP Plc's buyout of Atlantic Richfield Co.
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