Chevron, Texaco reopen merger talks

Chevron, Texaco reopen merger talks
REUTERS

NEW YORK, OCT 14: Chevron Corp and Texaco Inc, the No 2 and No 3 US oil companies, have reopened merger talks that could lead to a combined company valued at $85 billion based on market capitalisation, the Financial Times newspaper reported late Friday.

A combination of the two companies would signal further consolidation in the global oil industry, creating a strong competitor for oil leader Exxon Mobil Corp.

Senior executives of both companies have been in negotiations for several weeks and talks have accelerated over the last few days, the Financial Times reported.

A Texaco spokesman declined comment on the report, noting the company does not comment on speculation. Chevron officials could not be immediately reached for comment. The newspaper said people close to both companies confirmed that negotiations were heating up.

Texaco is considered an attractive target because its shares trade below other major oil stocks on a price-to-earnings ratio of 11 times. A merger would reinforce Chevron's position in West Africa, the newspaper noted.

This would be the second time that Chevron and Texaco considered a combination. Earlier talks collapsed in the spring over disagreement on the deal's price and which company would control the board.

The Financial Times reported that Chevron Chief Executive David O'Reilly has been more conciliatory in his approach to Texaco, willing to structure the agreement in a way that would be more acceptable to Texaco.

Shares of Chevron closed Friday $84-1/4, off a year high of$96-15/16 but up from a low of $70. Texaco shares ended at $55-1/8, off a high of $67-3/16 and up from a low of $44-1/4.