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Exxon, Mobil in talks
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November 27, 1998: 10:08 a.m. ET
Oil giants confirm 'discussions' for world's largest industrial merger
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NEW YORK (CNNfn) - Shares of Exxon Corp. and Mobil Corp. shot up Friday morning after the oil giants confirmed merger talks are underway, adding credence to speculation that the blockbuster combination may materialize early next year.
Negotiations between the companies - the two largest energy concerns to have emerged from the famed break up of Standard Oil Trust - reportedly are at an advanced stage. But the companies said in a joint statement Friday that no definitive agreement regarding a "combination transaction" has yet been reached.
"We cannot give any assurance that an agreement will be reached," it said. "Beyond this statement, we have no further comment."
Wall Street applauded the negotiations.
Shares of Exxon (XON) ended up 1-3/4 at 74-7/16 on the New York Stock Exchange, while shares of Mobil closed up 7-1/16 at 85-7/16 on the Big Board.
The deal would combine Exxon, the world's largest energy concern, and Mobil, the second-largest U.S. oil and gas company to create the world's largest oil concern with a market capitalization of more than $236 billion.
Exxon has a market capitalization of $176 billion; Mobil's market cap is more than $60 billion.
Oil glut forcing firms to merge
The merger talks come 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.
Mobil earlier this month announced plans to cut costs by $500 million for 1999. Other companies, including Exxon, Texaco Inc. (TX) and Chevron Corp. (CHV) have also announced cost-cutting measures.
In October, Atlantic Richfield Co. (ARC), the nation's seventh-largest oil company, said it would lay off 900 employees and close some overseas offices to reduce costs by $500 million over the next two years.
The Financial Times reported in its Thursday edition that the deal would likely be an all-stock transaction.
The deal would amount to the largest industrial merger, exceeding the $48-billion deal in August struck by British Petroleum Plc (BP) and Amoco Corp. (AN).
At the time, analysts expected the BP-Amoco merger to change the landscape of the oil industry, with other companies scrambling to make similar deals.
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.
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