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INTHESPOTLIGHT
DEAL OF THE MONTH
Echoing their competitors' "bulk is better" strategy, Phillips Petroleum Co. and Conoco Inc. agreed in November to merge in an allstock deal valued at $15 billion. The transaction, presented as a merger of equals, will create a new company to be called ConocoPhillps. The board will be evenly divided but Phillips shareholders come out slightly more than equal with nearly 57% of the company. The headquarters of the new entity will be in Houston, where Conoco's headquarters are.
"ConocoPhillips will move forward to deliver on our legacy growth projects, develop new opportunities in existing and emerging business lines, and enhance returns in our downstream business with our companies' leading technologies," said Phillips CEO James J. Mulva.
The new management structure will feature Mulva as president and CEO while Conoco CEO Archie W Dunham will delay his retirement until 2004 and serve as chairman of the newly combined company. The two men will head up a company that will be the sixth-largest oil and natural gas company in the world, based on reserves and production, and the third-largest U.S. oil company.
Reaction to the deal has largely been favorable. "This deal is a win-win situation because in the oil industry, size matters. The savings this will produce are important, and it should help both companies make money off their upstream projects. It will also help them downstream in refining and marketing," says James L. Van Allen, an oil industry analyst at Janney Montgomery Scott.
The companies said the deal will add to per-share earnings and cash flow within a year of closing, which is slated to occur in the second half of 2002. They project annual savings of $750 million based on more efficient management of upstream operations and the elimination of redundant administrative and corporate jobs.
Past deals laid the foundation for ConocoPhillips
The $750 million in savings...