SAN RAMON, Calif. -- ChevronTexaco Corp., the nation's second largest oil company, is buying smaller rival Unocal Corp. for about $17 billion, hoping to further accelerate its already surging profits by boosting its energy supplies in Asia.
The deal revealed yesterday proposes to unite San Ramon-based ChevronTexaco, which trails only Exxon Mobil Corp. in the US oil business, with El Segundo-based Unocal, the nation's ninth biggest oil and gas production company.
ChevronTexaco initially valued its acquisition price, consisting of stock and cash, at $62 per share, nearly 4 percent below Unocal's market value before the deal was revealed.
The offer disappointed investors, who had driven up Unocal's stock by 20 percent since the media reported ChevronTexaco's was discussing a possible takeover a month ago.
Unocal's shares slipped $4.75 to close at $59.60 on the New York Stock Exchange, while ChevronTexaco's shares fell $2.33 to finish at $56.98. Unocal shares rose 3 cents to $59.63 in after-hours trading. As part of the deal, ChevronTexaco will assume $1.6 billion of Unocal's debt and sell about $2 billion in assets.
ChevronTexaco chairman David O'Reilly told reporters yesterday he expects the proposed takeover to receive the required regulatory approvals so it can be completed before year's end.
Based on the two companies' most recent results, ChevronTexaco would have annual sales of about $163 billion after the acquisition is completed. That means the combined company still would be far smaller than Irving, Texas-based Exxon Mobil, which rang up nearly $300 billion in revenue last year.
Unocal has been considered an attractive takeover target for years, largely because of its valuable cache of natural gas in Asia and oil holdings in the Gulf of Mexico. O'Reilly said cost-cutting will include layoffs, but declined to project how many people will lose their jobs.