Shell to buy Pennzoil-Quaker State in $1.8 billion deal

Petroleum News Alaska Staff

Pennzoil-Quaker State Co., the nation’s biggest producer of motor oil and owner of the Jiffy Lube chain, is being acquired by Royal Dutch/Shell Group in a deal worth $1.8 billion.

The transaction calls for Royal Dutch’s Shell division to pay $22 a share in cash and assume $1.1 billion of Pennzoil-Quaker State’s debt.

Shell said the deal, announced March 25, has been approved by Houston-based Pennzoil-Quaker’s board of directors, and is expected to be completed during the second half of 2002. It is still subject to regulatory and shareholder approval.

Shell spokeswoman Gail Schutz said the acquisition would mean about 1,230 job cuts, or about 15 percent of the two firms’ combined work force.

Rob Routs, Shell Oil Products president and chief executive, said the deal will generate annual cost savings of about $140 million by 2004.

Pennzoil-Quaker State chief executive Jim Postl called the deal an effective way to leverage his company’s name recognition.

“Pennzoil-Quaker State will benefit significantly from being part of an enterprise with the geographic scope, operational scale, breadth of products and services, and financial resources necessary to compete in a consolidating industry,” he said.

Royal Dutch/Shell Group managing director Paul Skinner, who also is chief executive of the company’s oil products business, said it will make Shell a leader in the U.S. and global lubricants market.

Pennzoil-Quaker State also owns the nation’s biggest group of oil-change stores, Jiffy Lube, which has 2,150 locations across the United States.

Shell Oil, also based in Houston, produces and markets oil, natural gas and chemicals. It has reserves of 1.2 billion barrels of oil and 1.9 trillion cubic feet of natural gas.

Its parent company, Royal Dutch/Shell Group, is the third-biggest petroleum company in the world, after Exxon Mobil and BP.