The transaction, subject to approval by Pennzoil’s stockholders and customary regulatory reviews, is expected to close in the second half of 2002 and is expected to add to Shell’s earnings and cash flow in the first full year after it is completed. Shell’s estimated pre-tax benefits from the transaction will total about $140 million a year by 2004. One-time transaction costs were estimated at $100 million.

“Combining Shell’s networks and infrastructure and Pennzoil-Quaker State Co.’s leading motor oil brands and portfolio of other businesses, such as its car care brands and its large network of more than 2,000 Jiffy Lube stores will be a great strategic fit and will position Shell as a leader in the U.S. lubricants and car care business,” said Rob Routs, CEO of Shell Oil Products U.S.

Pennzoil CEO Jim Postl said the merger would give the company’s products the scope and scale to complete “in a consolidating industry.” Pennzoil merged with Quaker State in 1998. It sold its oil and gas exploration and production business, PennzEnergy Co. in 1999 to Devon Energy Corp. (see NGI, May 24, 1999). It also sold its last refinery in Shreveport, LA, in 2000, as part of a corporate-wide restructuring.

Shell said Pennzoil-Quaker State will be integrated with the existing Shell Oil Products U.S. lubricants organization and will be based in the Houston area. Through the integration, Shell estimates about 15% of the workforce will be eliminated across the United States, although there was not a breakdown of where the lost jobs would be. Pennzoil employs 1,319 in the Houston area and 7,400 worldwide.

Shell recently completed its acquisition of Texaco’s gasoline subsidiaries Equilon and Motiva, and when the rebranding of the Texaco stations is completed, Shell will become the largest U.S. gasoline marketer based on market share. With the Pennzoil acquisition, Shell would have a 35% market share, said Routs. Shell lost the use of the Havoline oil brand when Chevron merged with Texaco, which he said “leaves a hole in our portfolio.”

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