Chase, Bank of Montreal to Back Union Pacific in $3.5B Oil Deal

Chase Manhattan Corp. and Bank of Montreal said they will finance Union Pacific's planned $3.5 billion acquisition of Norcen Energy Resources Ltd., Union Pacific said Monday.

Union Pacific Resources Group Inc., Fort Worth, said Monday that it plans to pay $2.5 billion in cash for Norcen and assume $900 million of the company's debt.

Union Pacific is one of the largest domestic independent oil and gas exploration and production companies in the United States.

Norcen, based in Calgary, Alberta, has oil and gas operations in western Canada, the Gulf of Mexico, Venezuela, and Argentina.

Chase and Bank of Montreal, which agreed Friday to merge with Royal Bank of Canada, have committed to financing the deal, Union Pacific said. The transaction will involve a cash tender offer for all Norcen shares at $13.65 per share.

Toronto-based Noranda Inc., owner of 49.5% of Norcen's stock, has committed to sell its interest in the company in the tender offer.

Union Pacific expects the offer to begin within seven business days.

Nesbitt Burns and Salomon Smith Barney advised Union Pacific on the deal and will act as dealer-managers in the tender offer.

The boards of directors for both companies unanimously approved the acquisition.

Union Pacific, whose debt is rated A by Standard & Poor's, said it will begin a "deleveraging program," targeting a debt structure that will maintain no lower than a BBB-plus credit rating.

That program will involve asset divestitures and possibly the issuance of some equity. Norcen has a credit rating of BBB from S&P.

Union Pacific said that it would have $2.7 billion in revenues after the acquisition, compared with $1.9 billion in 1997.

In November, Union Pacific made a $6.4 billion hostile bid for Pennzoil Co., but withdrew its offer after Pennzoil refused to negotiate. u

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