Exxon and Mobil took an eagerly anticipated step towardcompleting their merger yesterday as shareholders for bothcompanies approved the combination. Mobil received 98% shareholderapproval for the deal and Exxon received 99%. The votes were heldat separate hotels in Dallas, TX.

“This is another major step in the process of creating the newcompany,” said Lou Noto, Mobil’s CEO. “I know that Mobil’s board ofdirectors made its recommendation regarding the merger verythoughtfully, recognizing both the strength of the company todayand the challenges we will face in the future. Our shareholderstoday 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 realtest will come during the regulatory process when the transactionundergoes strict Federal Trade Commission (FTC) and EuropeanCommission (EC) scrutiny.

Mobil said last week it expects regulatory approval from boththe FTC and EC by the end of the third quarter. The companies filedwith the EC in early May. One analyst, who wished to remainanonymous, said troubled waters loom ahead.

“The merger is now moving on to the nitty-gritty, and it won’tbe easy. One EC Commissioner was overheard a couple of weeks agosaying ‘Sometimes, there is one merger too many, even in the oilindustry.’ Eventually will the two companies merge? I think theywill. However, I give it over 50% odds that they don’t get it doneby the end of the third quarter.” He said both Exxon and Mobil knowthey are in for a fight and this knowledge already caused thecompanies to push back their original end-date from June to itspresent estimate in September.

Exxon shareholders also approved amending Exxon’s charter toincrease the number of authorized shares of common stock from 3billion to 4.5 billion shares.

The Exxon-Mobil combination is not the only energy companymerger facing bumps in the regulatory road. Last month, Alaska’sstate government hired David Boies, the lead prosecutor in theMicrosoft antitrust trial, to join the team reviewing the BPAmoco-Atlantic Richfield (ARCO) merger. The two companies areAlaska’s largest oil producers, and state officials are worried agigantic company that would discourage other producers fromoperating in Alaska.

“This is a really big hurdle for [Arco and BP Amoco],” onesource said. “If they can make it happen, the merger would be agreat move. The question is: Can two companies join together if theend product would dominate a service area? Alaska is right to beworried. A BP Amoco-Arco combination would own the state.”

He added that other “mega-mergers” will probably not occur despitethe constant rumors. Earlier this month Chevron and Texaco were saidto be in merger negotiations, and their stock prices fluctuatedviolently (See Daily GPI, May 17). Yetthose rumors have dissipated, mainly due to personality conflictsbetween the heads of the two companies and because of Texaco’sinvolvement in joint ventures with Shell, another Chevron suitor.

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