Summary
On August 22, 2002, Occidental Petroleum Corporation (OXY) announced the completion of a significant transaction involving its stake in Equistar Chemicals, LP. OXY divested its 29.5% interest in Equistar by selling the associated entities to Lyondell Chemical Company. In exchange, OXY received 34 million shares of Lyondell's newly issued Series B common stock, representing approximately 21% of Lyondell's outstanding common stock, and a cash payment of $440 million. This strategic move signals OXY's exit from the bulk petrochemicals business, a segment expected to be more volatile. The company anticipates this transaction will reduce future earnings volatility. OXY will account for its Lyondell shares as an equity investment. Notably, following the sale, OXY's indemnity related to approximately $420 million of Equistar's debt was terminated. OXY is also set to recognize an after-tax gain of at least $100 million in the third quarter of 2002, stemming from various factors including prior write-downs, an increase in the fair value of the Lyondell stock, and tax benefits.
Key Highlights
- 1Occidental Petroleum sold its 29.5% interest in Equistar Chemicals, LP to Lyondell Chemical Company for $440 million cash and 34 million shares of Lyondell Series B common stock (approx. 21% ownership).
- 2This transaction marks Occidental's exit from the bulk petrochemicals business, aiming to reduce future earnings volatility.
- 3Occidental will account for its stake in Lyondell as an equity investment.
- 4The sale resulted in the termination of Occidental's indemnity for approximately $420 million of Equistar's debt.
- 5Occidental expects to record an after-tax gain of at least $100 million in Q3 2002 from these transactions.
- 6The Series B common stock received by Occidental has transferability restrictions and may have dividends paid 'in-kind' (in shares).
- 7Two of Occidental's executive officers have been appointed to Lyondell's board of directors.