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Exxon, Mobil to merge?
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November 26, 1998: 3:42 a.m. ET
Oil giants reportedly in talks to create largest industrial merger
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LONDON (CNNfn) - Exxon, the world's largest energy company is reportedly in talks to acquire Mobil in a blockbuster stock transaction that would be the largest industrial merger ever and create an oil company with a market capitalization of more than $236 billion.
Negotiations between the companies are at an advanced stage and a formal announcement could come early next week, according to several published reports.
A stock transaction is thought to be the most likely outcome, though sources said the companies have not determined a purchase price for Mobil.
An Exxon official declined comment on the report, saying "We have no comment on rumors. We do not confirm, deny or discuss rumors." Mobil officials weren't available for immediate comment.
The deal would combine Exxon, with a market capitalization of $176 billion and Mobil, the second-largest U.S. oil and gas company with a market cap of more than $60 billion. Mobil is based in Fairfax, Virginia and Exxon is based in Irving, Texas.
The deal would be the world's largest industrial merger, exceeding the $48-billion deal announced in August by British Petroleum Plc (BP) and Amoco Corp. (AN).
The BP-Amoco deal will create the world's third largest energy company behind Exxon and Royal Dutch Shell. It was approved by BP shareholders Wednesday.
When it was announced, analysts said the BP-Amoco merger would change the landscape of the oil industry, with other companies scrambling to make similar deals.
Mobil was expected to link with another oil company in order to compete against the bigger companies. It has been linked with Chevron Corp. (CHV) and , Atlantic Richfield Co. (ARC), the nation's seventh-largest oil company.
Oil glut forcing firms to merge
News of the merger talks comes as oil companies are facing increased pressure to cut costs and streamline operations in the face of a worldwide crude oil glut that has pushed prices to their lowest levels in 12 years.
Kerr-McGee last month agreed to buy Oryx for $1.86 billion and Ultramar Diamond Shamrock and Phillips Petroleum agreed to form a joint venture.
And Seagull Energy agreed Wednesday to buy Ocean Energy for 1.1 billion in stock.
Mobil earlier this month announced plans to cut costs by $500 million for 1999. Other companies, including Exxon, Texaco Inc. (TX) and Chevron Corp. have also recently announced cost-cutting measures.
In October Atlantic Richfield said it would lay off 900 employees and close some overseas offices to reduce costs by $500 million over the next two years.
Antitrust concerns?
If an Exxon-Mobil merger is announced, it will likely spark antitrust scrutiny in the United States and Europe.
Both companies have roots in Standard Oil, which was dissolved in 1909 under antitrust provisions. Out of that company came Standard Oil of New Jersey (which later became Exxon) and Standard Oil of New York (Mobil), as well as other, smaller oil companies.
Rumors that Mobil (MOB) was a potential takeover target drove its stock up nearly 5 percent or 3-7/16 to close at 78-3/8 in Wednesday trade despite falling oil prices. Exxon (XON) shares finished unchanged at 72-11/16.
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Exxon
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