Mobil Price Tag Could Hit $80 Billion

Exxon Corp. could pay as much as $80 billion to acquire Mobil Corp. as the two oil giants iron out the final details of what would be the largest industrial merger in history, analysts said Monday.

The potential merger could result in the firing of about 12,000 people, or 10% of the combined work force, sources told Bloomberg News.

Analysts expect a majority of the job cuts to come in the companies’ refining and fuel sales units, which make up about half of their combined work force of about 123,000. The two companies have operations worldwide.

“Job cuts will be big,” said Jack Aydin, an analyst at McDonald & Co., who predicted the number of workers fired after the merger could surpass 15,000.

Both boards are expected to vote on the proposed transaction today, with final terms focusing on the price tag for Mobil. Irving, Texas-based Exxon may wind up paying as much as $100 a share in an all-stock deal, they said.

At Friday’s closing price of $86 per share, Mobil would be worth about $69 billion. At $100 per share, it is valued at just over $80 billion, based on 808.4 million Mobil shares outstanding. That would eclipse insurer Travelers Group’s purchase of Citicorp for $72.6 billion to form Citigroup.

Mobil’s stock was unchanged at $86 on the New York Stock Exchange after jumping $7.13 on Friday when the companies confirmed they were in talks about a possible deal. Exxon stock gained 63 cents to close at $75, also on the NYSE.

In order to get full management control of Mobil and complete the deal, Exxon may have to pay a premium of 30% to 40% to Mobil’s stock price prior to last week when talk of the deal first surfaced, analysts said.

“I think Exxon would probably have to sweeten the deal with some cash, but Exxon stock is an extremely good currency for Mobil shareholders to hold,” Fahnestock & Co. analyst Fadel Gheit said.

Exxon is the largest publicly traded oil company in the world in terms of market capitalization. Fairfax, Va.-based Mobil is the nation’s second-largest oil company and world’s fourth-biggest.

With the deal, which would also make it the world’s largest publicly traded oil company in terms of reserves, Exxon gains greater access to North Sea oil fields, potential lucrative deals with OPEC kingpin Saudi Arabia and a stronger presence in the U.S. refining and marketing arena, analysts said.

Exxon would also get $3 billion of cost cuts, according to sources familiar with the talks.

But Exxon, already the largest in terms of market capitalization, would have to prove bigger is better in an industry fighting the weakest oil price in 25 years.

“The fact that two well-managed companies such as Exxon and Mobil are even having these discussions demonstrates the industry’s determination to further cut costs in a period of weak oil prices,” Schroder & Co. analyst Michael Mayer said.

Exxon and Mobil declined to comment beyond their statement Friday when they warned they could not guarantee an agreement.