Texaco Inc. Accepts $3.24-Billion Bid for Canadian Oil Firm

Texaco Inc. said today it will sell its 78% interest in Texaco Canada for $3.24 billion in cash to Imperial Oil Ltd., Canada’s largest integrated oil company, which is controlled by Exxon Corp.

If the rest of Texaco Canada’s shareholders agree to sell their shares to Imperial, the deal will be worth $4.15 billion in U.S. dollars.

The sale marks one of the last steps in Texaco’s restructuring since it emerged from bankruptcy after its multibillion-dollar lawsuit with Pennzoil Co. over the acquisition of Getty Oil Co.

Texaco Canada is the fourth-largest oil company in Canada, and the sale attracted several bidders, including Australia’s Alan Bond. The agreement will allow Imperial a limited right to use Texaco’s trademark for up to two years, while the Texaco-branded inventory is sold.

Winning the bidding is a great coup for New York-based Exxon, already the world’s largest oil company.

“It’s exactly the price we were expecting,” said oil analyst Richard Pzena at Sanford C. Bernstein & Co.

The definitive agreement requires Imperial to tender for the remaining shares for the same price of $34.36 per share that will be paid for Texaco’s 78% interest. There are about 4,500 small shareholders in Texaco Canada.

“Now that we have substantially completed the asset sale portion of our restructuring,” said James Kinnear, Texaco president and chief executive officer, “we can focus on implementing the planned distribution of $1.7 billion to our shareholders, which we intend to announce just as soon as practical.”

Texaco has sold its West German subsidiary, Deutsche Texaco AG, for $1.2 billion and has sold a half-interest of its refining and marketing assets on the East and Gulf coasts of the United States for $1.8 billion to Saudi Arabia.

Texaco said certain oil exploration properties of Texaco Canada in Guinea Bissau and George’s Bank off Nova Scotia and heavy oil and tar sands projects in Western Canada will be excluded from the sale.