Oct. 01 - Shell and Saudi Aramco in Marketing Deal

Source Press Release
Company Royal Dutch Shell 
Tags Refining & Marketing Activities
Date October 08, 2001

Shell and Saudi Aramco have agreed a $3.8bn deal to buy out  Texaco’s stake in Equilion and Motiva marketing joint ventures. This deal clears the way for Texaco's merger with Chevron, which shareholders approved on Tuesday. It will also make Shell the largest petrol retailer in the US, with just over 14 per cent of the market.

Shell has signed a memorandum of understanding to acquire Texaco's 44 per cent interest in Equilon, a joint venture that includes 9,000 service stations and four refineries in the western states.

Under the agreement Shell and Saudi Aramco will also purchase  Texaco's interests in the three-way Motiva joint venture, which includes 13,000 service stations and four refineries on the east coast. Shell and Saudi Aramco will each hold 50 per cent in the joint venture on completion of the deal.

The acquisition comprises a $2.1bn cash payment, $1.4bn in debt and $300m in pension liabilities. Shell said the two downstream businesses would have to take combined one-off restructuring costs of $100m and rebranding costs of $500m over the next four years, but the transaction would generate $400m of savings a year by 2004 and would be accretive to earnings from 2002.

Texaco needed to dispose of its interests in the joint ventures to satisfy competition concerns over its $40bn merger with Chevron. It had put a book value on the assets of $2.8bn and was prepared to put the assets into an independently managed trust unless Shell and  Saudi Aramco paid a satisfactory price.

Chevron and Texaco's shareholders approved the merger later on Tuesday. Shell said the transfer of the Equilon and Motiva stakes was subject to definitive agreements and the approval of federal and state authorities but was expected to be completed by the end of the year.

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