Chevron Will Sell 49.2% Stake in Gulf Canada for $1.8 Billion

Chevron has announced that it will sell a 49.2% stake in Gulf Canada Ltd. to Olympia & York Resources of Toronto for about $1.8 billion.

“Although we are sorry to lose our position in a fine company like Gulf Canada, we feel this is an excellent arrangement for all parties,” Chevron Chairman George Keller said Thursday.

The agreement allows Olympia & York to buy 112 million common shares of Gulf Canada on or before July 16, subject to regulatory approvals.

Chevron will use the proceeds to reduce the debt incurred last year in a $13-billion buy-out of Gulf Oil, Keller said. Since the merger, Chevron has been selling assets to bring down the debt.

Olympia & York will also purchase an option to buy the remaining 25 million shares of Gulf Canada held by Chevron, which would give the Canadian company 60.2% of Gulf Canada.

The total deal is worth more than $2.2 billion.

The deal calls for half of the aggregate amount to be paid in U.S. dollars and the balance in Canadian funds, at an exchange rate specified in the final agreement.

Chevron has informed the Canadian government that the conversion of the balance would be handled in a way that lessens the impact on the value of the Canadian dollar.

Olympia & York Resources is a wholly owned subsidiary of Olympia & York Developments Ltd.