01 December 1998 15:05 [Source: ICIS news]
LONDON (CNI)--Exxon and Mobil announced Tuesday that they have agreed to merge in an $80.1bn deal which will create the world’s largest industrial company.
Under the terms of the agreement, each share of Mobil will be converted into 1.32015 Exxon shares. Exxon shareholders will own 70% of the merged company in a deal which values Mobil’s shares at $99.09 each (based on Monday’s closing stock prices) and the entire company at $80.1bn.
The merged company will be renamed Exxon Mobil Corporation and will have its headquarters in Irving, Texas. It will be headed by Exxon chairman and chief executive Lee Raymond who will be chairman, chief executive and president of the merged company. Mobil chairman and chief executive Lucio Noto will be vice chairman.
Exxon Mobil Corporation will be organised on a functional basis, the two oil majors said in a joint statement. Upstream activities will report to HJ Longwell, downstream to Mobil's Eugene Renna and the chemical business to Exxon’s Rene Dahan. Worldwide downstream headquarters will located in Fairfax, Virginia, while upstream and the chemicals headquarters will be in Houston, Texas.
In a joint statement, the two companies said the merger would deliver significant near-term pre-tax synergies of about $2.8bn.
Raymond said the two companies complemented each other in almost every facet of the business. He said there was a good strategic fit in chemicals. "Exxon’s chemical product line aligns well with Mobil’s chemical products. The two companies also share a common focus on efficiency and site integration. Exxon Mobil should realise immediate benefits through sharing the proprietary technology and best practices of each company."
The merger, which is subject to shareholder and regulatory approval, provides for termination fees of $1.5bn under certain circumstances. The parties have also entered into an option agreement that gives Exxon the right to buy up to 14.9% of the authorised but unissued common stock of Mobil.
Exxon’s chemicals interests, which dwarf those of Mobil, generated sales revenues last year of about $14bn (including inter-segment revenues). In contrast, Mobil’s chemical revenues were only $3.5bn. There is also a large gulf in the number of manufacturing plants and their geographical spread. Exxon has interests in 56 chemicals manufacturing sites in 24 countries; Mobil has 19 sites in 10 countries.
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