A federal judge in Cleveland yesterday delivered a serious blow to Mobil Corp.'s effort to take over Marathon Oil, telling Mobil to keep hands off until a court decides whether the proposed purchase violates antitrust law.
Mobil immediately appealed the decision by U.S. District Judge John M. Manos granting Marathon a preliminary injuction barring Mobil from purchasing any Marathon stock and said it will ask that the order be stayed until its appeal can be heard.
The court order was the latest development in the raging takeover battle that began Oct. 30 when Mobil offered to pay $5.1 billion for the reserve-rich smaller company. Last month U.S. Steel stepped into the bidding with an offer of approximately $6.2 billion, which Mobil topped last week with a $6.5 billion package.
Marathon officials, who have fought the Mobil takeover, said yesterday they were pleased by the court order. "The ruling vidicates our position that Mobil's proposal would have violated both the spirit and the letter of the antitrust laws."
U.S. Steel had no comment on the ruling.
Judge Manos ruled that Marathon appeared to have a reasonable chance of success in its effort to prove in court that the Mobil takeover would violate antitrust laws. If so, not only would Mobil's bid be endangered. Other oil companies that have been circling on the edge of the fray would probably drop any interest they might have in Marathon.
Still another court decision is pending that will help determine the outcome of the takeover fight. A federal judge in Columbus must rule on Mobil's contention that two key options clauses in Marathon's agreement with U.S. Steel are illegal. That may come later this week and could open the way for other bidders if the judge rules in Mobil's favor on that question.
A spokesman for Allied Corp., which disclosed that it had offered $6.5 billion for Marathon but was rejected, said the company would "still be interested" in the takeover if Mobil and U.S. Steel fail in their bids.
In Cleveland, Manos said yesterday that "Marathon has shown a reasonable probability that it will succeed at trial on the merits of the issue of probably substantial lessening of competiton in the states of Illinois, Indiana, Michigan, Ohio, Tennessee and Wisconsin as a results of the propsoed merger."
In his ruling he cited a 1962 Supreme Court opinion that "tendencies toward concentration in industry are to be curbed in their incipiency." If the Mobil-Marathon merger is found intolerable on antitrust grounds, the decision will have long-run impact on other possible combinations of oil companies.
The Federal Trade Commission must rule on the antitrust implications of the proposed merger too. That ruling must be delivered by midnight Saturday and is expected to be a key to whether other oil companies seek to buy smaller firms in the same industry. Mobil is the second largest oil company in the nation, and Marathon is the 17th largest.
Manos also said that Marathon had demonstrated that it would suffer irreparable harm if Mobil is allowed to proceed with its proposed takeover.
Hearings continued in Columbus yesterday on the legality of options that allow U.S. Steel to buy 10 million shares of Marathon for $90 a share and to acquire Marathon's interest in the Yates Field oil and gas reserves for $2.8 billion even if a third party takes over Marathon.
U.S. Steel Chairman David Roderick said that his company demanded the option on the Yates Field, a major source of Marathon's attraction. He also denied that the option was designed to keep Marathon from being bought by a third party. Mobil has said it may withdraw its higher priced offer for Marathon if the option is allowed to stand.
Mobil said yesterday that about 27.9 million shares of Marathon stock have been tendered to it as of the close of business Nov. 28. Under Manos's ruling, however, the oil major may not buy them until the antitrust question is resolved.
Under a separate order from Judge Joseph P. Kinneary in Columbus, both Mobil and U.S. Steel are barred from purchasing Marathon shares until after five business days following his ruling on an injunction against the options. The withdrawl date for both offers has also been extended by the same period of time. The proration date for U.S. Steel's offer, which was Nov. 28, has been extended to Dec. 4. Stock tendered by that date is first in line to be purchased.
Marathon stock closed again yesterday at $105, slightly lower than the approximately $106 a share average price of the U.S. Steel offer and the $108 estimated average price of the new Mobil bid.