A U. S. Court of Appeals in Cincinnati yesterday refused to set aside a judge's order blocking Mobil Corp.'s $6.5 billion bid for Marathon Oil Corp., another setback for the nation's second-largest oil company.
But Mobil confirmed yesterday that it will announce a new proposal--in combination with another oil firm--to take over Marathon in an attempt to remove antitrust objections that have stymied Mobil so far.
Mobil would not disclose the identity of its possible partner in a new bid for Marathon. The proposed revised bid is designed to eliminate some of the antitrust arguments that have been raised against the Mobil bid, which have centered on reduced competition in certain markets in the Midwest.
As a result, Mobil's new partner is expected to be an oil firm without significant refining and marketing operations in the Midwest. The possibilities include Sun Co., Getty Oil Co., Amerada Hess Corp., Cities Service Co., Phillips Petroleum Co., Union Oil Co., Tenneco, Mesa Petroleum Co., Superior Oil Co. and General American Oil Co. of Texas.
Mobil faces a critical deadline at midnight tonight unless one of the many federal courts involved in the complicated takeover fight intervenes to change dates. If not, shareholders have until then to switch shares from Mobil to U. S. Steel to be assured of receiving the latter's $125-a-share price for at least some of their holdings. The U. S. Steel offer, which is a combination of cash and notes, is worth an estimated $6.25 billion.
Midnight is the pro rata deadline for both standing tender offers. Shares tendered after that deadline receive less preferential treatment from whichever company succeeds. In the case of the U. S. Steel offer, they would be acquired for notes with an estimated market value of $86 each rather than for the cash price of $125.
Shareholders must choose between the Mobil offer--worth $126 a share and now barred by a preliminary injunction granted on antitrust grounds--and the U. S. Steel offer, which could be undone if a judge in another proceeding rules in favor of Mobil. Mobil has challenged key parts of the Marathon-U. S. Steel agreement and asked to have them declared null and void.
Neither company may purchase any tendered shares pending a decision in a lawsuit in federal court in Columbus in which Mobil is seeking to undo the Marathon-U. S. Steel agreement.
"Time is running out for Mobil unless they get relief on the pro rata deadline beyond Friday," said Dean Witter Reynolds analyst Alvin D. Silber. Silber said he believes the courts will step in to see that the major oil firm will not be damaged by critical deadlines slipping by while major issues remain to be resolved.
A Marathon spokesman said that Mobil's new proposal appeared similar to a hold-separate agreement that U. S. District Judge John M. Manos in Cleveland rejected earlier this week. Mobil proposed in that agreement to hold Marathon's marketing and refining operations separate and intact until they could be sold to another firm.
Manos delivered a blow to Mobil's hopes on Monday when he enjoined it at Marathon's request. The following day, Mobil sought an amended order incorporating the hold-separate feature. Manos rejected both that and an appeal that he stay his order until Mobil was heard on its appeal of the order.
Yesterday the 6th Circuit Court of Appeals let the Manos order stay pending further court action. It also scheduled arguments on Mobil's appeal for the week of Dec. 14.
"This latest action by Mobil underscores the point that even Mobil recognizes the serious violations of the antitrust laws connected with its attempted takeover," Marathon spokesman Michael Russo said.
In another development, Marathon announced that it will not purchase Husky Oil Co., the U. S. oil and gas subsidiary of the Canadian firm Husky Oil Ltd.