May 27, 1999
Exxon Mobil Merger: Who Really Benefits?
Statement of Wenonah Hauter, Director of Public Citizen’s Critical Mass Energy Project
It was no big surprise that Exxon’s and Mobil’s shareholders voted to approve the $81 billion acquisition of Mobil by Exxon. Profit estimates for the next year are high. Projected savings are estimated to be $2.8 billion a year. As with almost all takeovers, the savings will result from firing workers — the current estimate by Mobil insiders is a loss of 15,000 jobs.
Besides the workers who will lose their jobs, the other real losers are consumers who will see higher prices and less competition for decades to come. The FTC must look at the real consequences of this merger and not cave into the enormous political pressure to approve it.
No American Corporation was more profitable than Exxon last year, and Mobil was also among the top performers. Exxon CEO Lee Raymond was paid $3.3 million in salary and bonus in 1998. Lucio Noto, Mobil’s CEO, was paid $955,000 in salary and a $1.5 million bonus. Noto also received about $3 million in long-term incentive plan payouts. Both CEOs will profit handsomely from the merger that they have put together.
The stock swap deal that is part of the merger will give Mobil shareholders 1.32 shares of Exxon. Mobil’s pre-deal price of stock was worth about $25 a share less before the merger announcement. That means Mobil shareholders gained $20 billion and Mobil’s Noto gained $20 million for his 804,000 stock options.
Wall Street gains too. The planned merger of the two former Standard Oil companies will cost $2 billion to compete with an additional $90 million going to bankers and other players who put the deal together. For instance, J.P. Morgan and Goldman, Sachs have received $100,000 a month and will be paid $8 million each once the deal is competed. Fees from investment bankers, lawyers and accountants as well as other charges, will total about $90 million.