Exxon and Mobil Sign Merger Agreement
1 December 1998
Exxon and Mobil Sign Merger Agreement
NEW YORK--Dec. 1, 1998 --Editor:
Today Exxon and Mobil announced that they have reached an agreement to merge. A news release regarding this agreement follows. Key points in the news release include:
- Exxon shareholders to own about 70 percent and Mobil shareholders
to own about 30 percent of the merged company.
- The merged company will be renamed Exxon Mobil Corporation.
- Both the Exxon and Mobil brands will be retained.
- L. R. Raymond will be chairman, chief executive officer and
president of Exxon Mobil.
- L. A. Noto will be vice chairman of the Exxon Mobil Board. The
19-member Exxon Mobil Board will include six directors from
Mobil.
- Exxon Mobil will be headquartered in Irving, Texas.
- Worldwide downstream headquarters for Exxon Mobil will be located
in Fairfax, Virginia. Worldwide upstream headquarters and
worldwide chemical headquarters will be located in Houston.
Exxon and Mobil announced today that they have signed a definitive agreement to merge the two companies.
Under the terms of the agreement, each share of Mobil will be converted into 1.32015 shares of Exxon. As a result of the merger, Mobil shareholders will own about 30 percent of the company, while Exxon shareholders will own about 70 percent.
Upon completion of the merger, the company's name will be Exxon Mobil Corporation, with headquarters in Irving, Texas.
L. R. Raymond will be the Chairman, Chief Executive Officer and President of Exxon Mobil Corporation. L. A. Noto will join the Exxon Mobil Board of Directors as Vice Chairman.
E. A. Renna will join the Board as a Senior Vice President and Director. Four additional members of Mobil's Board will be invited to join the Exxon Mobil Board as non-employee Directors, bringing Board membership for the company to a total of 19 Directors.
The company will be organized on a functional basis. The Upstream will report to H. J. Longwell, the Downstream to Mr. Renna and the Chemical business to R. Dahan. Worldwide downstream headquarters for the company will be located in Fairfax, Virginia. Worldwide upstream and chemical headquarters will be in Houston, Texas. Exxon Mobil will continue to use both the Exxon brand and the Mobil brand.
"This merger brings together two outstanding organizations that share common values, have compatible strategies and demonstrated track records of achievement," said Mr. Raymond and Mr. Noto in a joint statement. "The merger will significantly enhance shareholder value by enabling us to manage the combined assets of Exxon and Mobil to produce a higher return on capital employed than either company could achieve on a stand-alone basis.
"The merging of these two companies will deliver significant near-term pre-tax synergies of about $2.8 billion," they said. "This merger will enhance our ability to be an effective global competitor in a volatile world economy and in an industry that is more and more competitive. It allows us to manage our expanded, combined asset base to deliver increasing returns and growth to our shareholders while reducing our operating costs. It also allows us to continue delivering quality products to our customers at competitive prices into the future. We are confident that with the exceptional quality of Exxon's and Mobil's employees, we will succeed in meeting these objectives."
They noted that combining Exxon and Mobil will create a major global company, headquartered in the U.S., with the technology, the resources and the people to compete effectively with other companies of a similar or larger scale in the world oil industry of the 21st Century. "The relative strengths of our two companies are highly complementary," they said. "When combined, Exxon Mobil will provide better opportunities for both our shareholders and employees than those they would experience without this merger. By combining our operations, we also will be better able to meet the needs of our customers for quality products in the next century. It's a good match."
"While we expect to benefit from a reduction of costs in the short-term, our real objective is to maximize growth and return on investment by successfully managing the existing assets of Exxon and Mobil and by selecting the best projects from the large portfolio of investment options that will be created by this merger," they said. "Combining the proprietary technologies and management expertise of the two companies also will reinforce the selection of Exxon Mobil as the partner of choice, creating additional resource opportunities in the future."
In discussing the strategic fit of Exxon and Mobil, Mr. Raymond said the two companies line up well with each other in almost every facet of the business. "In the exploration and production area, for example, Mobil's and Exxon's respective strengths in West Africa, the Caspian region, Russia, South America, and North America line up well, with minimal overlap. Our respective deepwater assets and deepwater technology also complement each other well."
Exxon Mobil will have combined natural gas sales of about 14 billion cubic feet per day, giving the company a solid position in this increasingly important worldwide fuel resource. Mobil also brings major LNG assets and experience to the combined company that complement Exxon's assets and technology with little overlap.
Mr. Noto said that in refining and marketing, Exxon and Mobil each have significant global brand recognition, expertise and technology. "In the lubricant area, for example, Exxon is an important producer of lube base stocks, which fits well with Mobil's leadership in lubes marketing."
In the U.S., Exxon Mobil will approach the size and scale nationally and regionally of the new downstream joint venture companies announced by other major competitors. Outside the U.S., Exxon Mobil will be competitively well positioned in key Asian markets and will have complementary positions in South America. The merger also builds on Mobil's significant position in Africa.
"Chemicals are another area where there is a good strategic fit," said Mr. Raymond. "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 realize immediate benefits through sharing the proprietary technology and best practices of each company."
Exxon and Mobil also bring important, state-of-the-art proprietary technologies to the venture that will greatly benefit the merged company. In exploration and production, this includes leading-edge geoscience technology to find and develop oil and gas reserves, arctic technology, and heavy oil technology. In refining, marketing and chemicals, this includes catalyst, synthetic lubricant and chemical manufacturing technology.
The merger is subject to shareholder and regulatory approval, as well as other customary conditions. It is intended that the merger will qualify as a tax-free reorganization in the United States and that it will be accounted for on a "pooling of interests" basis. In addition, the merger agreement provides for payment of termination fees of $1.5 billion under certain circumstances. The parties also have entered in an option agreement that grants Exxon the option under specified circumstances to purchase up to 14.9 percent of the authorized but unissued common stock of Mobil.
Exxon and Mobil expect to provide details of the proposed merger to their shareholders prior to their annual meetings in April and May, respectively.
Exxon's program of repurchasing its shares to reduce the number of shares outstanding will be discontinued; however, Exxon will continue to repurchase its shares to offset dilution from Employee incentive programs.
Exxon was advised on the merger by J.P. Morgan. Mobil was advised by Goldman Sachs.
1997 FACTS AND STATISTICS
EXXON
Financial
- Net income of $8.5 billion - Revenues of $137.2 billion - Capital employed was $52.9 billion - Capital and exploration expenditures of $8.8 billion - Return on Average Capital Employed of 16.5 percent
Exploration and Production
- Worldwide net production of 1.6 million barrels a day of crude
oil and natural gas liquids and 6.3 billion cubic feet of natural
gas a day - Proven liquid reserves of 6.8 billion barrels including oil
sands; proven natural gas reserves of 42.1 trillion cubic feet - Exploration and/or production activities in 30 countries at
year-end 1997
Refining and Marketing
- Total petroleum product sales of 5.4 million barrels a day - 33,000 service stations worldwide - Refinery throughput of 4.0 million barrels a day - Interests in 31 refineries in 17 countries
Chemicals
- Sales of 17.3 million tons of product a year - Revenues totaled $14.0 billion, including intersegment revenues - Interests in 56 manufacturing sites in 24 countries
Other
- 80,000 employees worldwide at year-end 1997 - Common shares outstanding (as of 11/27/98) 2,427.7 million. In
addition, there are 3.8 million common share equivalents in the
form of Convertible Class A Preferred Stock held by a LESOP
trust.
MOBIL
Financial
- Net income of $3.3 billion - Revenues of $65.9 billion - Capital employed was $26.5 billion - Capital and exploration expenditures of $5.3 billion - Return on Average Capital Employed of 13.4%
Exploration and Production
- Worldwide net production of 0.9 million barrels of crude oil and
natural gas liquids per day and 4.6 billion cubic feet of natural
gas a day - Proven liquid reserves of 4.1 billion barrels; proven natural gas
reserves of 17.0 trillion cubic feet - Exploration and/or production activities in 25 countries at year
end 1997
Refining and Marketing
- Total petroleum product sales of 3.3 million barrels a day - Approximately 15,500 service stations worldwide - Refinery throughput of 2.1 million barrels per day - Interests in 19 refineries in 12 countries
Chemicals
- Sales of 4.0 million tons of product a year - Revenues totaled $3.5 billion, including intersegment revenues - Interests in 19 manufacturing sites in 10 countries
Other
- 42,700 employees worldwide - Common shares outstanding (as of November 27, 1998) 779.9
million. In addition, there are 16.6 million common share
equivalents in the form of Series B ESOP Convertible Preferred
Stock