Texaco, Chevron merger gets OK

Monday, Sept. 10, 2001 | 11:07 a.m.

Federal regulators on Friday gave Chevron Corp. and Texaco Inc. permission to move ahead with their $46 billion merger after the companies agreed that Texaco would sell its big retail operation in Nevada and other states.

The Federal Trade Commission approved a consent order allowing the merger to be completed. It also negotiated a deal with the attorneys general of 12 U.S. states, including Nevada, assuring that competition would not be reduced, a move some feared could have led to higher consumer prices for gasoline.

Texaco and Chevron shareholders will vote on their merger Oct. 9.

"Because of the concessions that have been made, we feel confident this will contribute to retail and wholesale gasoline marketers in Nevada remaining competitive," said Attorney General Frankie Sue Del Papa in a statement issued Friday.

Consumer Advocate Tim Hay said today that the sale of Texaco assets is key to resolving antitrust concerns.

The Associated Press reported that officials with Houston-based Shell Oil Products Co. LLC said Sunday they would consider acquiring assets covered in the Chevron-Texaco merger.

"After reviewing the proposed deal, we've determined that there would be no negative impact on Nevada consumers," Hay said. "We expect to see a gradual changeover in the branding in the next two years or so."

Chevron and Texaco will become ChevronTexaco Corp., the fourth-largest oil company in the world. It will be headquartered in San Ramon, Calif.

The merger is not expected to have a major impact on stores that sell Chevron and Texaco gasoline because most of them are independent contractors and not owned by either gasoline company. Texaco signs are likely to come down and be replaced by those of the buyer or buyers of Texaco's retail arm.

When the merger was first announced, an association representing many of the stores was concerned that the merger would create problems for Chevron- and Texaco-supplied stores that were close to each other.

Peter Krueger, state executive of the Nevada Petroleum Marketers and Convenience Store Operators, noted that there are several places in Las Vegas where "there's a Chevron on one corner and a Texaco on the next corner."

But Krueger is now convinced that operators of both Chevron and Texaco stations will be protected as the merger is completed.

"We went through the same concerns with the Mobil-Exxon merger," Krueger said. "The underlying issue is that the independent marketers will continue to have access to the brand."

Chris Van Dyck, a deputy attorney general who assisted Hay in reviewing the consumer issues, said one of his goals "was to allow them (independent operators) to continue flying the (Chevron) brand."

Krueger said there are about 55 stores that sell Chevron gasoline in the Las Vegas area and about 30 that sell Texaco, which he estimated constitutes between 15 percent and 20 percent of the independent retail outlets in the valley.

Krueger said most of the stores that sell Chevron and Texaco lease those brands from the company, with few company-owned operations. The reason: A state law passed in 1987 prohibited oil companies from owning their own stations in the state. Ten years later, the measure was amended allowing oil company ownership, but most companies have worked to develop relationships with the independents instead of building their own stores.

Krueger is skeptical that Shell would buy all of Texaco's assets, but if it did, it could trigger antitrust concerns involving Shell's position in the marketplace. Van Dyck said his office would look into Shell acquisitions if the proposal builds steam.

As far as independent operators are concerned, the merger deal and the settlement involving the sale of Texaco assets isn't expected to create any problems.

Paul Orluske, general manager of Speedee Mart, one of the independents selling Texaco gasoline at five Las Vegas-area outlets, said while information has been hard to come by, he has been assured by suppliers that the transition will be smooth.

"He doesn't seem to think it's going to be any problem," Orluske said of his Texaco contact.

One of the divisions Texaco already has agreed to sell involves aviation fuel sales in Nevada. Ann Arbor, Mich.-based Avfuel Corp. has agreed to buy Texaco's general aviation business in 14 states. The purchase price was not disclosed.