Exxon-Mobil Merger Passes First Hurdle
Exxon and Mobil took an eagerly anticipated step toward
completing their merger yesterday as shareholders for both
companies approved the combination. Mobil received 98% shareholder
approval for the deal and Exxon received 99%. The votes were held
at separate hotels in Dallas, TX.
"This is another major step in the process of creating the new
company," said Lou Noto, Mobil's CEO. "I know that Mobil's board of
directors made its recommendation regarding the merger very
thoughtfully, recognizing both the strength of the company today
and the challenges we will face in the future. Our shareholders
today voiced their strong support for the board's recommendation."
One challenge facing the two companies is completing the merger.
Many in the industry viewed today's votes as foregone conclusions.
One source called the votes "glorified rubber stamps." The real
test will come during the regulatory process when the transaction
undergoes strict Federal Trade Commission (FTC) and European
Commission (EC) scrutiny.
Mobil said last week it expects regulatory approval from both
the FTC and EC by the end of the third quarter. The companies filed
with the EC in early May. One analyst, who wished to remain
anonymous, said troubled waters loom ahead.
"The merger is now moving on to the nitty-gritty, and it won't
be easy. One EC Commissioner was overheard a couple of weeks ago
saying 'Sometimes, there is one merger too many, even in the oil
industry.' Eventually will the two companies merge? I think they
will. However, I give it over 50% odds that they don't get it done
by the end of the third quarter." He said both Exxon and Mobil know
they are in for a fight and this knowledge already caused the
companies to push back their original end-date from June to its
present estimate in September.
Exxon shareholders also approved amending Exxon's charter to
increase the number of authorized shares of common stock from 3
billion to 4.5 billion shares.
The Exxon-Mobil combination is not the only energy company
merger facing bumps in the regulatory road. Last month, Alaska's
state government hired David Boies, the lead prosecutor in the
Microsoft antitrust trial, to join the team reviewing the BP
Amoco-Atlantic Richfield (ARCO) merger. The two companies are
Alaska's largest oil producers, and state officials are worried a
gigantic company that would discourage other producers from
operating in Alaska.
"This is a really big hurdle for [Arco and BP Amoco]," one
source said. "If they can make it happen, the merger would be a
great move. The question is: Can two companies join together if the
end product would dominate a service area? Alaska is right to be
worried. A BP Amoco-Arco combination would own the state."
He added that other "mega-mergers" will probably not occur despite
the constant rumors. Earlier this month Chevron and Texaco were said
to be in merger negotiations, and their stock prices fluctuated
violently (See Daily GPI, May 17). Yet
those rumors have dissipated, mainly due to personality conflicts
between the heads of the two companies and because of Texaco's
involvement in joint ventures with Shell, another Chevron suitor.
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