Texaco to Sell W. German Unit for $1.23 Billion
Texaco Inc. on Monday announced that it had agreed to sell its West German subsidiary to Rheinish-Westfaelisches Elektrizitaetswerk AG, the country’s largest utility company, for a little more than $1.2 billion.
At its headquarters in Essen, the German firm, also known as RWE, said it would pay $1.23 billion for Texaco’s 99.12% interest in Deutsche Texaco AG, completing the first major part of a $5-billion restructuring plan by the White Plains, N.Y.-based oil giant.
The deal, signed in Luxembourg, was subject to approval by the West German Federal Cartel Office, but both sides said they expected it to encounter no difficulties. It will become effective five days after the permission arrives, probably by the end of the month, said RWE spokesman Friedhelm Gieske.
Negotiations leading to the sale had been going on for months, as Texaco immersed itself in plans to restructure following its April emergence from Chapter 11 Bankruptcy Court protection.
The nation’s third-largest oil company had filed for that protection a year earlier to avoid having to post an $11-billion security bond while appealing a $10.3-billion judgment held against it by Pennzoil Co. A jury ruled that Texaco had interfered with Pennzoil’s 1984 attempt to acquire part of Getty Oil Co. so it could buy Getty itself.
Texaco agreed in December to settle the suit by paying $3 billion to Pennzoil as part of a restructuring plan that included the sale of $3 billion worth of assets.
Meanwhile, Carl C. Icahn, Texaco’s largest stockholder with 14.8% of the company’s shares, stepped up pressure on management to do more to increase the value of its stock.
In March, he threatened to run a slate of five candidates, including himself, for Texaco’s board, if the company did not take steps that would raise the price to $55 per share from the $30 range in which it was then trading.
A month later, Texaco, in an apparent bid for stockholder support, announced the restoration of its dividend and an expansion of its planned asset sales to $5 billion.
The moves failed to placate Icahn, who recently offered $60 per share for those Texaco shares he does not already known, and launched his threatened proxy fight for the five seats on the company’s board.
The results will be announced at Texaco’s annual meeting on June 17.
Meanwhile, Texaco’s stock has continued to hover at levels near $50 per share, as Icahn kept up his attacks on its management.
Commenting on the Deutsche Texaco sale, James W. Kinnear, president of the parent company, apparently had those criticisms in mind.
“The proceeds from this transaction, together with those from other imminent asset sales and joint venture partnerships, will be providing real benefits to our shareholders,” he said in a statement. “We are committed to significantly enhancing the value of our shareholders’ investment.”
