Exxon, Mobil Finalize $81B Merger
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WEDNESDAY, DECEMBER 1 1999 5:31 PM EST
DALLAS, Dec 01, 1999 (AP Online via COMTEX) -- A merger creating the
world's largest publicly traded oil company has driven the MOB from Wall Street.
MOB, the stock symbol of Mobil Corp., disappears as of today from stock listings as Exxon Corp. has completed its takeover and formed the new Exxon-Mobil Corp. Exxon's old symbol, XON, also disappears and has been replaced by XOM.
Shares of Exxon-Mobil were trading up $1.37 1/2 at $80.68 3/4 in late morning trading on the New York Stock Exchange.
But while stock traders will have a new symbol to deal with, consumers should see relatively little change at the pump, according to oil industry analysts. The way analysts see it, even the combination of the nation's two largest oil companies isn't enough of a force to control prices in a highly fragmented industry. Nor, they said, would the forced sale of an Exxon refinery in California do anything to reduce high gasoline prices there.
A few analysts even believe the requirement that Exxon and Mobil sell 2, 413 service stations -- 15 percent of their total -- as a condition of the $81 billion merger might increase competition.
A half dozen or so major oil companies and independents are expected to bid for the stations, many of which occupy valuable real estate in the Northeast and Mid-Atlantic.
George Gaspar, an analyst with Robert W. Baird and Co. in Milwaukee, said the forced sale gives smaller companies a chance to get big in a hurry. "It will enhance at least two of the downstream players, so from that point of view there should be an improvement in competition," Gaspar said.
In a comment echoed by other analysts, Tyler Dann of Banc of America
Securities in Houston said the gasoline-retailing business is among the most competitive out there -- with or without the merger.
''How many other industries is the price of the product displayed for all the world to see?'' Dann said. ''On balance, the merger is probably a neutral'' on gasoline prices.
''It's such a global market that no one company has a whole lot of pricing power,'' said Mark Hastings, an analyst with Citibank Global Asset Management in Stamford, Conn.
Some, such as Frank Knuettel of Paine Webber in New York, took a
wait-and-see attitude. ''It's much too early to tell what the effect on competition will be when we don't even know who the buyers are.''
The combined Exxon-Mobil will produce 3.8 percent of the world's oil with 120,000 employees and $138 billion in assets.
Public Citizen, a consumer and environmental advocacy group, said the merger ''is likely to lead to higher prices at the gas pumps'' because of market dominance.
Company executives have defended the merger as a way to reduce costs and allow them to compete worldwide against the huge government-owned oil companies in Saudi Arabia, Mexico and Venezuela that are even larger than the combined Exxon-Mobil.
Officials in California, where motorists are plagued by gasoline prices significantly above the national average, believe the divestiture of Exxon's refinery in Benicia, Calif. could improve competition among refiners if the facility is sold to a company not already active in the state.
But analysts said the divestiture won't increase refining capacity, and they blamed the higher prices on the state's stricter standards for gasoline that produces fewer emissions.
Analysts generally agreed that the new Exxon Mobil will suffer a short-term drop in earnings from the sale of service stations but will profit in the long run by cutting costs and shifting assets from selling gasoline into exploring and producing oil. In this view, there is even a silver lining in the forced sales of assets estimated to be worth $2 million to $4 million.
''They're exiting a low-return business and they'll be able to invest the money in a high-return industry,'' said Dann.
Exxon-Mobil is expected to spend some of the money on exploration in Brazil, off the coast of West Africa and other global spots.
Matthew Warburton, an analyst with Warburg Dillon Read in New York, said the combined company might see a loss of 5 percent of revenue, which his investment bank has estimated at $11.4 billion for next year, but will more than make that up over time.
''There will be a cost hit for a couple years, but Exxon is a very prolific cost cutter,'' Warburton said. He and other analysts said job losses from the merger will exceed the 9,000 estimated by the two companies.
As for the divestitures required by the Federal Trade Commission, ''It was a price worth paying to get the deal through,'' Warburton said.
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