Phillips, Conoco Sign Agreement to Merge; Deal Tentatively Worth $35 Billion
{{#rendered}} {{/rendered}}Phillips Petroleum Co. and Conoco Inc. are merging in a $35 billion deal that will create the nation's third largest integrated oil company, the companies announced Sunday.
The merger would create a corporation with more than $60 billion in assets. The deal, expected to close during the second half of 2002, is subject to regulatory and shareholder approval.
The new company will also assume $18.6 billion in debt and preferred securities.
{{#rendered}} {{/rendered}}The combined company, to be called ConocoPhillips, would be based in Houston, home to Conoco. It would keep a reduced presence in Bartlesville, where Phillips employs 2,400 at its headquarters and research facility.
"This is really a growth story for Conoco and Phillips," said Conoco Chairman Archie W. Dunham, who is delaying a planned retirement to serve as chairman of the combined company. "We think this is the best way to create long term and short term value for our shareholders."
Phillips Chairman James Mulva will be chief executive officer and president of the new company and become chairman when Dunham retires in 2004.
{{#rendered}} {{/rendered}}"What we saw was just an ideal time for us to put our growth plans together," Mulva said.
ConocoPhillips would be the nation's third-biggest oil and gas company in terms of production and the fifth-largest refiner in the world. The two have combined employment of 58,000 worldwide and expect to save at least $750 million a year by merging.
Mulva said most of the savings should come from realized operating efficiencies instead of job cuts. Workforce reductions are planned in Bartlesville, he said.
{{#rendered}} {{/rendered}}Under the terms of the deal, Phillips shareholders will get one share of each of ConocoPhillips stock for each Phillips share they own. Conoco shareholders will get .4677 shares of the new stock.
Phillips shareholders will end up with a 56.6-percent stake in the company, despite the fact that both companies characterized the merger as one of equals.
The merger should result cost savings in refining, marketing and transportation and more capital to fund worldwide exploration and production, the two men said during a teleconference.
{{#rendered}} {{/rendered}}Merger talks began in earnest about six weeks ago, Dunham said. Both have been rumored merger candidates for years.
Phillips is a familiar face to motorists in the United States with its Phillips 66 logo. The company has more than 5 billion barrels of oil in reserve.
Last year it merged its gas gathering and processing operations with Duke Energy and combined its chemicals division with ChevronTexaco.
{{#rendered}} {{/rendered}}Phillips bought Tosco earlier this year, giving the combined company the capacity to produce more than 1.7 million barrels of oil a day.
Phillips sells gasoline at more than 12,000 locations under the Phillips 66, Circle K and 76 brands.
Houston-based Conoco has oil and gas exploration activities in 20 nations and has 3.7 billion barrels of oil in reserve. Earlier this year, it acquired Gulf Canada Resources.
{{#rendered}} {{/rendered}}The company also operates nearly 6,000 miles of pipelines nationwide and has stakes in nine refineries in the United States, Europe and Asia. It operates more than 7,000 gas stations in Europe, Thailand and the United States.
The deal comes on the heels of several big energy mergers. In September, the Federal Trade Commission approved Chevron Corp.'s acquisition of Texaco Inc. Other deals include BP Amoco's takeover of Atlantic Richfield Corp. in 1999 and Exxon Corp.'s acquisition of Mobil Corp., as the world's largest oil companies look for size and breadth to gain a competitive edge.