BUSINESS/ECONOMY

Filling up on Texaco

BRIAN BURTON March 28 1988
BUSINESS/ECONOMY

Filling up on Texaco

BRIAN BURTON March 28 1988

Filling up on Texaco

Robert Blair, chairman of Calgarybased Nova Corp., has been working for the past two months to meld that company and Polysar Energy & Chemical Corp. of Toronto into Canada’s largest petrochemical company. As well, the exuberant Canadian nationalist has been trying to merge Husky Oil Ltd. with U.S.owned Texaco Canada Inc. to create the nation’s third-largest oil company. Blair has already shown himself to be a deft practitioner of putting together such accords. In 1978 he managed to purchase Husky from its American owners—and then succeeded in selling more than 50 per cent of it to a wealthy Hong Kong family last year without creating a nationalist uproar over foreign control in the Canadian oil and gas sector.

Texaco has been a prime candidate for a takeover since last December, when its parent company, Texaco Inc. of White Plains, N.Y., agreed to pay a $3.9billion out-of-court settlement to Houston-based Pennzoil Co. The settlement was the result of a lengthy legal battle between the two oil companies which began when Texaco pre-empted Pennzoil’s partial purchase of Getty Oil Co. in 1984. Since then Texaco has been looking for ways to raise the necessary cash.

During that time the American company declined Nova’s proposal to make a formal offer of $3.4 billion for the Canadian subsidiary. Now Blair has appealed directly to Texaco’s shareholders by offering to buy an additional $1.2 billion

worth of Texaco Inc. assets, raising Husky’s total outlay to $4.6 billion.

But Texaco Canada is a highly prized asset and one that Texaco Inc. management may be counting on as a cornerstone for rebuilding. Still, many industry analysts say that Husky is in a strong position to succeed because of the firm’s connections to Hong Kong magnate Li Ka-shing, who, together with his son Victor, owns 52 per cent of Husky. Li said last year that he is willing to invest an additional $1 billion in the Canadian oil and gas industry and may even be willing to spend more.

Some oil analysts say that the proposed merger of Husky and Texaco would create a well-balanced and formidable company. It would overtake Petro-Canada for third place among oil producers in Canada. Husky president Arthur Price says that Texaco’s cash flow would be used to develop Husky’s oil-and-gas-rich properties off the east coast, in Alberta and the Beaufort Sea.

As well, Husky would become a national gasoline retailer by linking its 335 service stations, mostly located in Western Canada, to Texaco’s 2,000, which are located primarily in Eastern Canada. And Price said that if Husky succeeds in securing Texaco, it could prove that Canadian control can be effectively exercised with less than 51-per-cent ownership. And for Blair, that minority share snared him a giant in the oil industry.

— BRIAN BURTON in Calgary

BRIAN BURTON