Texaco signs deal with Shell and Saudi Refining for sale of Equilon

Texaco announced that it has signed a Memorandum of Understanding (MoU) with Shell Oil and Saudi Refining Inc. (SRI) for the sale of its interests in Equilon Enterprises, its US refining and marketing joint venture with Shell, and Motiva Enterprises, its downstream joint venture with Shell and SRI. Subject to federal and state regulatory review and completion of definitive agreements, Shell would have 100 % interest in Equilon and Shell and SRI would each have a 50 % interest in Motiva.
At present, through its subsidiaries Texaco holds 44 % interest in Equilon and 35 % interest in Motiva. Shell holds a 56 % interest in Equilon and 30 % interest in Motiva. Saudi Refining's current interest in Motiva is 35 %.

Under terms of the MoU, Texaco would receive approximately $ 2.4 bn in value, including proceeds of $ 2.15 bn, tax benefits and other considerations for the sale of Texaco Refining and Marketing Inc. (TRMI), its wholly owned subsidiary which holds the interests in Equilon and Motiva. Additionally, Shell and SRI will assume responsibility for approximately $ 1.4 bn in debt and $ 0.3 bn in other liabilities.
Commenting on the announcement, Texaco chairman and CEO Glenn F. Tilton said, "Since beginning discussions with Shell and SRI on the sale of our interests in the US downstream businesses, we have focused on reaching an agreement that represents fair market value for Equilon and Motiva. That is the objective of this Memorandum of Understanding."

The MoU includes a protocol for the licensing and protection of the Texaco and Havoline brands. Shell would also waive its change-of-control purchase provision of Texaco's 45 % interest in the Malampaya Deep Water Natural Gas Project in the Philippines. Shell is operator of that project.
Assuming shareholder approval of Texaco's merger with Chevron, Texaco will place its interests in Equilon and Motiva into a trust, as required under the FTC Consent Order approved for public comment on September 7. The Chairman and Divestiture Trustee,Robert A. Falise, will be empowered to complete the agreements with Shell and SRI, although the trust will still seek a third-party purchaser of Texaco's interests in the two companies.