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agreed to acquire



Monday for cash and stock worth $62 a share, bringing the recent rage for corporate megamergers back to the oil sector.

Unocal holders can elect to receive either $65 cash or 1.03 Chevron shares, although the percentage is subject to proration and the final per-share price is likely to be $62. Unocal closed Friday at $64.35, up roughly 50% since the start of the year as word of a possible takeover leaked out.

ChevronTexaco will issue about 210 million shares of ChevronTexaco stock and pay about $4.4 billion in cash in the deal. ChevronTexaco will also assume estimated net debt of $1.6 billion.

In premarket Instinet trading, Unocal was down $4.07, or 6%, to $60.28.

"Unocal is a unique independent with supermajor assets that are an excellent fit with our existing portfolio and our long-term strategies -- to grow profitably in core upstream areas, build new legacy positions and commercialize our large undeveloped natural gas resource base," ChevronTexaco said.

Chevron expects combined oil-equivalent production in 2006 to average about 3 million barrels a day. Unocal's 1.75 billion barrels of oil-equivalent proved reserves would increase ChevronTexaco's reserve base as of the end of 2004 by about 15%, while the weighting of natural gas reserves would increase by about 5 percentage points, one-third of the oil-equivalent total.

The acquisition is expected to be accretive on a cash flow per-share basis to Chevron, while it should be "broadly neutral" to earnings per share. ChevronTexaco said it plans further repurchases following completion of the acquisition.

ChevronTexaco listed three areas where the acquisition will yield immediate benefits: Asia-Pacific natural gas, Gulf of Mexico exploration and Caspian Sea production. The company expects to carry out asset dispositions totaling more than $2 billion and sees annual cost savings of $325 million before tax.