Mobil May Sell Up to $1 Billion in Assets in Order to Reduce Debt
Mobil Corp. said Thursday it may sell up to $1 billion in assets over the next two or three years to help pay down the sizable debt it took on when it acquired Superior Oil for $5.7 billion last September.
Mobil Chairman and Chief Executive Rawleigh Warner Jr. wouldn’t specify which assets Mobil might sell, but a spokesman said the company is considering the sale of Superior Oil assets that are unrelated to oil and gas.
Earlier this week, Mobil said it will shed its Montgomery Ward retail subsidiary, which has been a disappointment to the big oil company since its acquisition nine years ago. The $1-billion figure cited Thursday does not include the Montgomery Ward divestiture, a spokesman said.
Mobil is the latest oil company confronted with cheap oil and flattened demand to undertake a major realignment of assets. In the most sweeping industry restructuring yet, Los Angeles-based Atlantic Richfield said last week that it will sell or close 2,000 gas stations east of the Mississippi and a refinery in Philadelphia. Other companies, including Exxon and Amoco, have jettisoned businesses unrelated to oil and gas.
‘Drop in the Bucket’
Craig Schwerdt, an oil industry analyst with Morgan, Olmstead, Kennedy & Gardner in Los Angeles, said Mobil’s potential sale of $1 billion in assets represents “just a drop in the bucket for Mobil,” which has assets of $41.8 billion, but he applauded the move. “What we’re seeing is a lot of these oil companies turning around and correcting the diversification mistakes they made,” he said.
Analysts speculated Thursday that Mobil is likely to sell its Canadian coal and metals mining operations that were acquired in the Superior Oil purchase or commercial real estate it owns in Hong Kong and Houston. “I’d say that combination would get them half to three-quarters of the way there,” one analyst said.
Mobil doesn’t report the results of its mining operations separately, but analysts said they believed that the business was marginal at best.
Another likely candidate, analysts said, is Container Corp. of America, a major producer of paperboard, which Mobil obtained with its $1.7-billion acquisition of Marcor Inc., parent of Montgomery Ward, in 1976. Warner wouldn’t comment on that possibility Thursday at Mobil’s annual meeting in Philadelphia.
Mobil’s paperboard packaging business earned $34 million last year on sales of $1.9 billion. That business includes the much smaller W. F. Hall printing company, which prints and binds catalogues and books.
Swap of Assets
Warner said that Mobil wasn’t considering a divestiture of gas stations similar to that at Arco. “We’re going to stay in this business,” he said. But like Arco, Mobil will cut back on exploration efforts and intensify development of existing oil fields, Warner said.
Herbert Hart, an analyst with S. G. Warburg, Rowe & Pitman, Akroyd in San Francisco, said he doesn’t expect Mobil to sell any gas stations in the northeast “where Mobil has a high penetration.”
Schwerdt said Mobil, Arco and other oil companies might engage in “asset swaps” rather than cash sales. He said, for example, a company dominant in the East might trade Western properties with a company dominant in the West.
Warner said Mobil hasn’t yet decided how best to divest Montgomery Ward, although analysts have speculated that the unit would be spun off with shares distributed to Mobil shareholders. Warner said it would “take quite some time” to put the unit on its feet financially.
Montgomery Ward, the nation’s sixth-largest merchandising chain, suffered three years of losses from 1980 to 1982. Last year, it reported earnings of $53 million on sales of $6.7 billion. Mobil said it will take a $500-million write-down on Ward’s.
Warner told shareholders yesterday that the board of directors plans to name Allen E. Murray, currently Mobil’s president and chief operating officer, as chief executive when Warner retires next February. Murray was named president and chief operating officer on Nov. 1. Warner didn’t say who would be named chairman.
