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News > Deals
Exxon, Mobil defend deal
March 11, 1999: 1:28 p.m. ET

Consumers, shareholders to benefit from cost-saving deal, CEOs tell House
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NEW YORK (CNNfn) - Top executives from oil giants Exxon Corp. and Mobil Corp. told a House subcommittee Thursday the two companies need to carry out their planned $77 billion merger to achieve cost savings.
     Citing a tough industry climate in which key competitors have combined, Exxon Chairman and CEO Lee Raymond and Lucia Noto, Mobil's chairman and CEO, told the House Energy and Power subcommittee a deal will benefit shareholders and customers.
     "By putting Mobil and Exxon together ... particularly in the upstream, we will have a portfolio that will diversify our asset base so that we can become a better competitor than we are now," Raymond said. Upstream refers to exploration and production activities.
     Some members of Congress fear the deal, which would combine the nation's top two oil companies, will create a retail oil behemoth that is capable of notching up pump prices.
     Noto said size was just an afterthought.
     "We never put this together because we want to be the biggest at anything. We want to be efficient," he said. The companies expect to save $2 billion in costs through the deal.
     The hearings come a day after Federal Trade Commission competition director William Baer told the House Commerce Committee Exxon may be ordered to sell some of its gas stations and refining assets to win approval of the deal. The FTC is examining the merger.
     Massachusetts Democrat Edward Markey, one of several subcommittee members to say he isn't opposed to the merger, said the FTC should ensure a combined company cannot artificially increase the cost of oil and gas.
     Exxon and Mobil are playing catch up: rivals Amoco and British Petroleum recently tied up for $49 billion, creating BP Amoco (BPA).
     Noto decried falling oil prices -- what he termed "easy oil" -- as putting a squeeze on the industry, leading to such mergers. Giant state-owned oil companies also pose a threat, the executives said.
     Noto said Mobil has cut costs as much as possible and is now down to the "muscle," with little "fat" remaining in its operations.
     Last month, European competition officials expressed reservations about the Exxon-Mobil deal because Mobil has a joint venture with BP Amoco.
     Scheduled to address the subcommittee later Thursday were John Lichtblau, chairman of the Petroleum Industry Research Foundation; Tom Reidy, a board member of the Service Station Dealers of America; and Charles Shotmeyer, president of Shotmeyer Brothers Petroleum Corp.
     Shares of Dow issue Exxon (XON) rose 2-7/16 to 75-3/4, while Mobil (MOB) climbed 3-3/4 to 95-1/8 in New York Stock Exchange trading early Thursday afternoon. Back to top

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