Filed by Chevron Corporation Pursuant to Rule 425 under the Securities Act
of 1933 and deemed filed pursuant to Rule 14a-12 under
the Securities Exchange Act of 1934
Subject Company: Texaco Inc.
Commission File No. 333-54240
Date: February 9, 2001
Except for the historical and present factual information contained herein,
the matters set forth in this filing, including statements as to the expected
benefits of the merger such as efficiencies, cost savings, market profile and
financial strength, and the competitive ability and position of the combined
company, and other statements identified by words such as "expects," "projects,"
"plans," and similar expressions are forward-looking statements within the
meaning of the "safe harbor" provisions of the Private Securities Litigation
Reform Act of 1995. These forward-looking statements are subject to risks and
uncertainties that may cause actual results to differ materially, including the
possibility that the anticipated benefits from the merger cannot be fully
realized, the possibility that costs or difficulties related to the integration
of our businesses will be greater than expected, the impact of competition and
other risk factors relating to our industry as detailed from time to time in
each of Chevron's and Texaco's reports filed with the SEC. Chevron and Texaco
disclaim any responsibility to update these forward-looking statements.
Chevron has filed a Registration Statement on Form S-4 with the SEC
containing a preliminary joint proxy statement/prospectus regarding the proposed
merger transaction. Investors are urged to read the definitive joint proxy
statement/prospectus when it becomes available and any other relevant documents
filed with the SEC because they will contain important information. The
definitive joint proxy statement/prospectus will be sent to the stockholders of
Chevron and Texaco seeking their approval of the proposed transaction. In
addition, you may obtain the documents free of charge at the website maintained
by the SEC at www.sec.gov. Also, you may obtain documents filed with the SEC by
Chevron free of charge by requesting them in writing from Chevron Corporation,
575 Market Street, San Francisco, CA 94105, Attention: Corporate Secretary, or
by telephone at (415) 894-7700. You may obtain documents filed with the SEC by
Texaco free of charge by requesting them in writing from Texaco Inc., 2000
Westchester Avenue, White Plains, New York 10650, Attention: Secretary, or by
telephone at (914) 253-4000.
Chevron and Texaco, and their respective directors and executive officers,
may be deemed to be participants in the solicitation of proxies from the
stockholders of Chevron and Texaco in connection with the merger. Information
about the directors and executive officers of Chevron and their ownership of
Chevron stock is set forth in the proxy statement for Chevron's
2000 annual meeting of stockholders. Information about the directors and
executive officers of Texaco and their ownership of Texaco stock is set forth in
the proxy statement for Texaco's 2000 annual meeting of stockholders. Investors
may obtain additional information regarding the interests of such participants
by reading the definitive joint proxy statement/prospectus when it becomes
available.
* * *
[Transcript of comments of John Watson, Vice President, Finance and Chief
Financial Officer of Chevron and Peter Robertson, Corporate Vice President of
Chevron, excerpted from Chevron's 4th Quarter Security Analysts Meeting held on
February 5, 2001, and made available through www.chevron.com]
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WATSON: I'd like to talk about a few of the highlights from the year 2000.
This is a list of things that I have a chart or two on each that I'll cover. The
exception is the worldwide upstream area. That topic will be covered by Peter
Robertson in fair detail, so I won't comment significantly on that subject, but
I will touch upon each of the others that you see here.
First, the Chevron/Texaco merger update. As you may know, Pat Lynch from
Texaco and I are responsible for the merger integration effort that is, frankly,
going quite well. I was on a teleconference this morning with all the merger
integration team leaders, and the work is going quite well. It's progressing in
the pace that we expected. Folks are getting along quite well. We talked about
the common history and experience we have working together and that's proven to
be a big asset in all the discussions that we have had up to now.
As far the regulatory approval process, I wish I could be more specific
than I'm able to be. I can tell you that we did receive our second request from
the FTC. Our approach to the FTC has been one of being cooperative with them,
talking with them. You may recall that our initial filing, we resubmitted so
that they would more chance to review the initial filing. Otherwise, the second
request would have come without them having had adequate time to review our
initial submission. That tactic proved to be a good one, I think, for us as upon
reviewing the information we submitted initially, they were able to limit the
scope of the second request somewhat. It also established a good dialogue with
them and has enabled us to further reduce the scope in areas where the FTC is
determined that there are not competitive issues. As far as when will be get
approval from the Federal Trade Commission, it's difficult to speculate as
commenting before we went on the air here to a couple of people, that it's
really a 01 situation. Either you have approval or you don't, and it's
inappropriate for me to speculate on when that approval will come. I'll just say
we're working closely with them on the approval process.
The integration activities are going well. For those of you who didn't hear
Dave O'Reilly when he talked about the transaction on October 16th, we have
indicated that we expect to generate $1.2 billion in synergies within six to
nine months. I've seen nothing in what we've done so far to suggest that we
won't achieve that goal. We've talked about other benefits to the merger in the
release that we had around October 16th. I'll refer you to those documents at
this time. I'll just say that the integration work is going well. We expect to
see ongoing and
continuing benefits that'll more than justify the transaction
and the premium that we paid to Texaco shareholders.
Organizational structure. Those of you that look at our SEC filings will
note that while we didn't issue a press release on the subject, we did make some
internal announcements that are available to you, if you choose to follow them,
on the organizational structure as well as other topics. Every couple of weeks
Pat Lynch and I put out a note to our employees to update them on the status of
the merger. For some of you it's not material information, but to employees it
is. We do file them with the SEC, so you can see them. The most recent release
that we put out talked about the basic organizational structure for the
business, and what you'll see in there is that the upstream business will be
organized basically the way that Chevron is organized today. There are a few
changes, but for the most part, we'll have two operating companies, North
American business that'll be based in Houston, and international upstream
business that will be based in San Ramon with business units, decentralized
business units, reporting in to the heads of those operating companies. That's
very similar to what Chevron has today. The downstream business will be a little
bit different. you may have noticed in our S-4 filing we talked about the
anti-trust work that we did before the merger where we indicated that we
expected the FTC to have issues around Equilon and Motiva which are the
interests that Texaco holds in the United States. And that the interest that
they have, we expected them to be divested or required to be divested or
required to be divested by the FTC.
So that's the premise we went into the merger with. Using that as a
premise, the business will be organized into four regional refining and
marketing businesses, one in the U.S. that will fly the Chevron flag and then
two that will fly existing Texaco business flags, and then the area that was
formerly Caltex. And we'll use those brands because there's really no overlap in
those businesses.
So in the retail business, you'll see four regional refining and marketing
companies. But something that we're going to be doing that'll be very different
will be forming global businesses in four or five different areas because that's
the best way to serve customers. If you look at the trading business -- I'll
give you an example. We had three trading offices in Singapore, Caltex, Chevron,
and Texaco. It doesn't make much sense to have three trading offices. We'll have
a global trading business. We'll have a global lubricants business. Many
customers of lubricants want to buy worldwide, so we'll have a global lubricants
business better able to serve them. We'll have a global aviation business
similar to the airlines. Many of them like to purchase globally. We'll have a
global shipping business, etc. So there are selected businesses that we'll
operate on a global basis. They'll be co-located in many cases with the regional
refining and marketing companies to keep overhead down, but we'll have a focus
on the customer in those global businesses.
So five global businesses, four regional refining and marketing companies,
and we expect significant benefits from that. We haven't talked about specific
synergy numbers in the downstream business. We've talked about $200 million
outside of upstream in the operative businesses that included downstream when we
made our merger announcement, but I'm comfortable that we're going to see real
benefits to our downstream business that accrue to the business over many years.
It's quite exciting to be able to form an international downstream business
rather than have the somewhat vulcanized business that the three companies have
today.
As far as management nominations go, within seven days from now, I think
I'm fair in saying, we'll have an announcement out on the management in the new
company. No doubt many of you saw the announcement that Texaco made yesterday
that Peter Bijur had elected retirement yesterday. That's an issue that if you
have additional questions on, I'll refer you to Texaco. It's certainly an issue
between Peter and his Board. I'll just say that it was business as usual with
the integration teams this morning. I talked with Pat Lynch. I know Glenn Tilton
quite well. Many of you know Glenn as well. I have been on the Caltex board with
Glenn, and I anticipate that we'll be able to move forward without skipping a
beat.
Next steps are to continue the integration planning, get FTC approval, and
close the transaction. Timetable for doing that, we said initially around
October that it was going to take six to twelve months to close this transaction
and we haven't really changed from that range.
* * *
QUESTION: It's Arjun Murti with Goldman Sachs. John, just regarding Peter
Bijur's surprise resignation, from the perspective of Chevron and your
confidence in smoothly integrating the company and quickly realizing the cost
savings and executing the merger, doesn't it raise some concern on your part
that this abrupt resignation will either slow the integration process or cause
cost savings to not be realized quite as quickly?
WATSON: It causes me not one minute of concern. I spent time on the weekend
on the phone with Glenn Tilton who I know very well, with Pat Lynch who I know
very well from the Caltex board. We've been working closely with the merger
integration teams. The format for the merger integration has been something like
this: Pat Lynch and I have been designated the merger executives responsible for
the merger integration effort. We have formed teams. It's been a very
interesting process. What we've done is rather than have every executive
involved in the merger integration process, we've asked most of the senior
management of the company to focus on running the business. And what we've done
is we've drawn some very talented people that I would call middle-management to
staff up the merger integration teams. Now they have consulted with the merger
executives, but they have not had to get a sign off on every single decision.
That's enabled us to be very quick in developing our merger integration plans,
and we've affirmed those plans through periodic meetings through what we call
our decision review board with Pat Lynch, myself, Peter Bijur, and Dave. Our
last meeting was last Thursday and Friday. It went very well. All the plans that
we had were endorsed. A few things were tweaked in terms of direction or an area
of emphasis based on input from Dave and Peter. My expectation is that process
would continue just as it has. Glenn Tilton will sit in for Peter. He's been
very familiar with what's been going on, and I really don't expect us to skip a
beat.
QUESTION: And just as a follow up to that, it's publicly known that Shell
and Texaco are in negotiations over Equilon and Motiva. Would you also say that
Peter's abrupt resignation does not impact those negotiations in any way?
WATSON: The executives that are overseeing those discussions are Glenn
Tilton and Paul Skinner. Mark.
QUESTION: Mark Gilman, ING Baring. John, this is a U.S. upstream question.
If you'd prefer to defer to Peter, that's fine. You want to take it, please do.
There's been some indications recently that you're more aggressively looking for
partners on your deepwater program. And I'm wondering whether you could, first
of all, affirm that that's true. But secondarily, is this the early stages of
strategic shift with respect to the deep water, or am I potentially making too
much of something that might not even be true?
WATSON: Mark, certainly Chevron and Texaco both have extensive deepwater
interests, and I would expect as a result of the merger that we're going to high
grade our activity. So it's too early to predict exactly what changes will take
place, so whether we'll look for partners in the way of farm outs or something
of that sort remains to be seen. I think it would be natural to expect in an
area where both companies have extensive holdings that we would rationalize that
to some degree. If you look at the results so far in the deepwater for us, I
can't say that we've achieved everything we want to in the deepwater. I think
Pierre talked about some write offs that we had for wells. But I'll point out
that this is an exploration play and you're drilling these wells. You need to
drill enough to get a reasonable statistical representation of the geology
that's there. So I don't think you're seeing a change in direction, but I do
think you'll see changes as a result of the merger that would be natural in an
area of considerable overlap so that we can do more effective rig planning,
etc., to drill the best prospects that the two companies have together. Peter,
you have anything you want to add? Peter doesn't run this business anymore, but
he's not unfamiliar with it.
ROBERTSON: No, no. I would just add one thing, Mark, just to build on what
John said about Texaco. A lot of our leases in the deep water Gulf of Mexico are
50/50 with Texaco, and so if we, after the merger, end up with 100 percent,
we're just not going to want to drill 100 percent exploratory wells. So there
will, without question, have to be some looking for partners in some of those
areas.
* * *
QUESTION: Paul Ting of Salomon Smith Barney. Two unrelated questions. First
of all, on the Texaco merger, obviously you've had quite a few discussions with
FTC. I'm wondering whether there are any areas of concern that had been raised
outside of the domestic refining and marketing areas. Second question is more
topical nature. With the announcement of Phillips and Tosco this morning, do you
see any threats to you on your West Coast refining availability of A and S
crude? Possibility of vertical integration between Phillips and Tosco, how does
that create opportunities or risks for you?
WATSON: Okay. With respect to the FTC, I mentioned earlier that the FTC has
taken certain areas off the table, so to speak, based on either initial
submissions or a lack of concern about overlap. I don't intend to go into those
specific areas that they still have an interest in. I will say that they have
taken a number of areas off the table. There's more than just downstream that
they're looking at today because we do have power and other interests, but I
don't want to be specific about a particular geography or a particular area at
this time.
QUESTION: [inaudible].
WATSON: No. We expected the FTC to look at everything. The FTC has an
obligation to do that. I said last quarter and I've said at the time of the
merger they will vigorously protect the interest of consumers, and they are
going to look at every area of the business. Frankly, it's a pleasant surprise
when something is taken off the table because they're going to look at
everything. With respect to your question about A and S crude and its
availability, we have other sorts of crude that we could obtain. Tosco -- I'm
not an expert on Tosco, but I believe they run a significant amount of A and S
today, and they'll be certainly a significant competitor with A and S crude and
significant refining capacity on the West Coast, but I don't know of any
particular competitive disadvantage that we would see as a result of it. It's
still early, Paul, but I can't think of a particular disadvantage that we would
see based on our ability to run different sorts of crude.
QUESTION: Hi. Jim Hoffman, P. Schoenfeld Asset Management. Given the
announcement this morning on the Phillips transaction, what is the impact, if
any, on your chemical venture? And secondly, you stated that pooling obviously
restricts your ability to repurchase shares. Given the recent FASB changes,
would you consider changing the pooling accounting to purchase accounting in the
merger?
WATSON: With respect to pooling accounting, I don't expect to -- pooling
accounting is a condition of the merger. We're operating under the existing FASB
conditions and expect the transaction to be poolable, and we don't intend to
change that. With the new rules on the abolition of pooling accounting, I don't
believe we're going to have a material impact on the oil and gas industry the
way they're structured. In general, what they allow you to do is to assign more
value to goodwill and not amortize that. We don't have much goodwill in upstream
transactions in our industry, so it's really not an issue. I'm sorry; your first
question?
* * *
QUESTION: Marlise Randle from AG Edwards. And just a follow up question
from Argent. Regarding the -- how you're moving in with the merger and Peter
retiring, are you going to be replacing him with a Texaco personnel or like, for
example, Glenn or do you know at this time?
WATSON: Glenn will certainly replace Peter on the decision review board
that I talked about earlier and in aiding the merger integration process. As far
as appointments go for the new company, the only people that have been appointed
initially were, of course, Dave O'Reilly, Dick Matzke and Peter Bijur. With
Peter's resignation, there are only two individuals that have assigned positions
now and that's Dave and Dick. We'll come out with more appointments within the
next week or so, and I think we'll be able to answer that question more clearly
at that time.
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