Mobil Corp., which is battling U.S. Steel Corp. in a fight to take over Marathon Oil, charged in federal court in Columbus yesterday that Marathon's board of directors made "a sweetheart deal" with the steel company at the expense of Marathon shareholders.
Mobil has filed a suit challenging two major features of that deal--an option that gives U.S. Steel the right to acquire 10 million shares of Marathon stock and another that allows U.S. Steel to buy a valuable piece of Marathon's domestic oil and gas reserves even if another firm, such as Mobil, takes over Marathon.
U.S. District Court Judge Joseph P. Kinneary yesterday extended the withdrawal dates for the Marathon offers to five business days after he rules on Mobil's request for a preliminary injunction to block the U.S. Steel offer. Kinneary also said he would permit both Mobil and U.S. Steel to solicit tender offers and disseminate their materials for their respective offers.
Mobil's attorney, John C. Elam, said yesterday that the Yates Field in Texas, where Marathon owns a 49.6 percent interest and is the sole operator, is worth between $4 billion and $6 billion. The option allows U.S. Steel to buy that interest for $2.8 billion.
The outcome of the Mobil suit is one of two legal decisions that will be turning points in the takeover fight. Mobil, which increased its bid for Marathon from $5.1 billion to $6.5 billion Wednesday to one-up U.S. Steel's offer, has made its new, improved tender offer conditional on the outcome of the Columbus hearing. If the options are not declared null and void, Mobil reserves the right to withdraw the offer or alter it to allow Mobil to buy as little as one-third of Marathon's stock.
The other critical legal decision involves a ruling by a federal judge in Cleveland on whether Mobil's takeover bid violates antitrust law. The Federal Trade Commission also is studying the antitrust question.
As attorneys were trading charges in the federal courtroom in Columbus, U.S. Steel issued a statement in Philadelphia attacking the new Mobil offer. The steel company said the conditions of the offer place a substantial cloud over it and render it unattractive.
The steel company also said that it has increased its credit to $5 billion under an agreement with 33 domestic and foreign banks.
In still another development, U.S. Steel Chairman David Roderick moved to allay criticism surrounding the company's bid for Marathon. "The Marathon acquisition is being undertaken without threat to our steel or other business segments," he said in a letter to employes. He said that benefits from environmental legislation and tax law changes will be reinvested in steel. Congressional critics of the agreement between U.S. Steel and Marathon have speculated that those savings may be financing the takeover.
Roderick also said that diversification benefits the company's steel operations by helping the company to ride out poor markets.
In the Columbus courtroom, Mobil attorney Elam said that Marathon's directors were looking out for their own interests rather than for the stockholders when they sought other bidders, including General Electric Co., Eastman Kodak Co., International Paper Co., Gulf Oil Corp. and U.S. Steel.
U.S. Steel's attorney, William Ginn, said that the steel company was able to move in because Mobil's offer was "ridiculously low."
Marathon President Harold W. Hoopman, who was on the stand for several hours, said that Marathon directors were motivated by a desire "to block a grossly inadequate offer" rather than by selfishness.