Prepared by: Mohil Poojara 11020241051

Lee Raymond, CEO of Exxon will continue as the CEO of Exxon Mobil and Lou Noto, CEO of Mobil will be the Vice President of the merged entity

Historical Background
Decedents of Standard Oil 1911 Standard oil dissolved and split into 34

companies Jersey Standard Exxon Socony Mobil

 Led by Walter C. Teagle Largest oil producer in the world Was marketed with the names Esso, Enco &

Humble Changed its name to Exxon in 1972

 Led by Henry Clay Folger 1931 Socony-Vacuum 1933 Socony Vacuum

and Jersey Standard merged their interests in Far East into a 50-50 joint venture 1963 changed name to Mobil

Rationale/Synergies
A reflection of industry forces Three Categories
Near Term Operating Synergies Capital Productivity Improvements Technology Synergies

Near Term Operating Synergies

Per tax benefits of $3.8 billion Operating Synergies:
Increase in production Sales and Efficiency Decreases in unit costs Combining complementary operations

Capital Productivity Improvements

Efficiencies of scale Cost savings Sharing of best management practices Business and Assets were highly

complementary

Technological Synergies
Owned proprietary technologies in the field

of:
Deep water and arctic operations
Heavy oils, gas-to-liquids processing LNG

High Strength Steel

Refining and Chemical Catalyst

Regulatory Issues
4-0 Vote in favour by Federal Trade Commission Concerns over areas where these firm directly

competed Extensive Restructuring:

Sell 2431 gas stations primarily in northeastern US,

California, Texas Exxon to scrap options to buy Gasoline stations, divest its refinery and its jet turbine oil business and stop selling diesel fuel and gasoline in California under the Exxon name for at least 12 years Mobil to shed its fee and leased service stations from NY to Virginia, divestiture of joint venture with BP Amco

The Merger
Pooling of Interest Method Under the merger agreement, an Exxon

subsidiary would merge into Mobil so that Mobil becomes a wholly owned subsidiary of Exxon Mobil In the combined entity, Exxon shareholders would hold 70% and Mobil shareholders 30% Holders of Mobil common stock would receive 1.32015 shares of Exxon common stock for each share of Mobil common stock

Valuation

 Since Exxon's market capitalization was significantly larger

than Mobil's, Exxon's shareholders would have enjoyed a greater proportion of the value creation if no premium were paid by Exxon in the merger. By offering a premium to Mobil's shareholders, this potential value creation was instead shared in approximately equal proportions between the companies' shareholders and such sharing was deemed to be a reasonable allocation of value creation. J.P. Morgan's analysis showed that for transactions involving smaller companies with a relative market capitalization comparable to that of Mobil pre-announcement, a premium of 15% to 25% matched market precedent. In comparison, BP paid 35% premium for Amoco.

Market Reaction
Positively assessed the merger as

economically sound and value creating 20 day Cumulative Abnormal Returns Exxon 1.07%, Mobil 14%

Sources of Information
http://ec.europa.eu/competition/mergers/cas

es/decisions/m1383_en.pdf "Exxon Mobil Joint Proxy statement in S-4 SEC Filing (Apr 5, 1999) "FTC File No. 9910077, November 30, 1998 Crow, P (October 1999). "Exxon-Mobil merger wins approval in EU". Oil & Gas Journal 97 (43): 24.

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