Merger OK May Hinge on Sale of Calif. Assets
Exxon Corp. and Mobil Corp., the two largest U.S. oil companies, may have to sell gasoline stations and other businesses in California and elsewhere to win federal approval of their $75.3-billion merger, a U.S. antitrust official hinted in congressional testimony Wednesday.
“Exxon and Mobil face each other at just about every level of the industry . . . in many parts of the country,” especially in California, the Northeast and the Gulf Coast regions, William Baer, director of competition at the Federal Trade Commission, told a House panel.
The sheer size of an Exxon-Mobil merger guaranteed close scrutiny by politicians and federal antitrust regulators. Analysts said at the time the merger was announced that regulators would be likely to approve the combination and insist only that the firms divest a limited number of operations in specific markets where a merger would mean too much concentration.
In California, where each company operates one refinery, Exxon and Mobil together would rank third in gasoline sales, with about 18.5% of the market. Los Angeles-based Atlantic Richfield Co. and Chevron Corp. are first and second, respectively, in the state.
Exxon agreed in December to acquire Mobil, in a move that would combine the biggest U.S. oil companies and reunite two of the biggest pieces left by the 1911 government breakup of John D. Rockefeller’s Standard Oil empire.
The deal still awaits government approval. Representatives of federal regulatory agencies--of the FTC as well as the Securities and Exchange Commission--testified before the House Commerce energy and power subcommittee.
The combination will face close scrutiny at the refining level as well, Baer said. In California, he said, a fire at a Tosco Corp. refinery last month sparked a 30% wholesale price increase in the state.
“It does show how a small reduction of supply by firms in a concentrated market can provoke huge price increases,” he said.
Baer said the FTC also will review the exploration and production business, although he said the agency will consider competition from around the world on that issue.
Noting that the oil industry is rapidly consolidating, Rep. Thomas J. Bliley (R-Va.), the Commerce panel chairman, said, “It is important that we take a look at these mergers--what is driving them and how they will impact consumers.”
Exxon declined to comment on the hearings. There was no immediate comment from Mobil. Exxon Chief Executive Lee Raymond, scheduled to become the head of the combined company, and Lucio Noto, chairman of Mobil, are scheduled to testify today.
In New York Stock Exchange trading, Exxon stock rose $3.38 to close at $73.31, and Mobil rose $3.38 to close at $91.38.
Other Oil News
Unocal to Sell Fields, Plant: Unocal Corp. agreed to sell oil and natural gas fields and a gas-processing plant in the Rocky Mountains to Tom Brown Inc. for $76.4 million in stock and cash. El Segundo-based Unocal said it wants its Spirit Energy 76 unit, which oversees the properties, to focus on finding and producing oil and natural gas in the Gulf of Mexico, the U.S. Gulf Coast and Permian Basin. Tom Brown will pay Unocal $5 million in cash and 5.8 million shares of common stock. That gives Unocal a 16.52% stake in Midland, Texas-based Tom Brown, which explores for oil and gas in the Rockies and in Texas. Unocal can’t sell the 5.8 million shares for two years, the company said. Unocal shares rose $2.44 to close at $33.13 on the NYSE, and Tom Brown rose 25 cents to close at $12.56 on Nasdaq.
