Chevron and Texaco? Maybe, Maybe Not
Merger rumors that tweaked the stock prices of Chevron and
Texaco have cooled somewhat. While the industry awaits word of a
deal (or no deal), observers might consider the words of management
and economics professor Lester Thurow.
"Once a company is in play, Wall Street arbitrageurs can drive
the deal." Thurow, a Massachusetts Institute of Technology
professor who gave the keynote address at GasMart/Power in Dallas
last week, told NGI merger talk can turn to merger action as
companies are forced to respond to the Street. Obviously, this is
one reason why the first chorus of every merger ballad is "no
Word of a Chevron-Texaco pairing hit the market May 7, causing a
drop in the shares of presumed acquirer Chevron and a rise in
Texaco shares. Market action last Monday saw Chevron rise and
Texaco drop. Among obstacles to a deal (expected to value Texaco at
about $42 billion) are the questions of who would head a combined
company and the expectation Texaco would surely have to exit some
of its U.S. refining and marketing joint ventures with Shell to
At the Howard Weil Energy Conference in New Orleans in April,
Texaco CEO Peter Bijur said his company had not ruled out a merger
or acquisition. He told attendees the Texaco of the future will be
heavily into high-tech services and be a "high solutions provider."
Bijur said technology and knowledge base are becoming more
important than the resource base (see NGI April 19, 1999).
As recently as two weeks ago, Bijur publicly disavowed any
merger plans and made a strong case that it is not necessary to
grow larger in order to survive. In his GasMart/Power speech,
however, Thurow said only the largest multinational companies will
survive globalization, and midsize national companies won't make
it. Texaco and Chevron combined would be about half the size of
Shell, currently the third largest major behind Exxon and BP Amoco.
Not surprisingly, neither company was commenting last week.
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