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. Last Updated: 07/27/2016

Texaco Buys Unocal for $16.4Bln

NEW YORK -- ChevronTexaco on Monday said it agreed to acquire Unocal for about $16.4 billion, bulking up its oil and natural gas reserves in the Asia Pacific region at a time when energy prices hit record levels.

ChevronTexaco, a distant No. 2 behind ExxonMobil in U.S. oil production, beat out Italian oil group Eni, China National Offshore Oil and other potential suitors to acquire the No. 9 U.S. oil and gas producer. The deal would be the largest takeover in the oil sector in years.

The deal gives ChevronTexaco a valuable portfolio of discovered and underdeveloped deepwater oil and natural gas assets overseas.

"Unocal should make a good fit with ChevronTexaco," said James Halloran, analyst with National City Private Client Group in Cleveland. "It gives them a much stronger presence in exploration and production."

With energy companies struggling to boost their reserves, Unocal, based in El Segundo, California, was an attractive takeover target. Many of its assets are in Southeast Asia and could help meet growing demand from China and India.

"If you look at where all the assets are they are pretty close to hot markets," said Subash Chandra, an analyst at Morgan Keegan. "It's just a substantial oil company that is up for sale and that is rare in this business."

The deal is structured as 75 percent stock and 25 percent cash. ChevronTexaco will issue about 210 million shares and pay about $4.4 billion in cash in the acquisition, which provides an overall value of about $62 per share based on the closing price of its stock Friday.

Unocal shareholders may elect to receive either 1.03 shares of ChevronTexaco stock or $65 in cash for each share of Unocal stock. ChevronTexaco will also assume about $1.6 billion in debt.

(AP, Reuters)