U.S. Steel Corp. took control of Marathon Oil Co. yesterday with the purchase of 30,000 shares--or 51 percent--of Marathon's stock. Two-thirds of Marathon's shareholders still must approve a merger of the nation's largest steel producer with the nation's 17th-largest oil company, a combination that will create the 12th-largest industrial firm in the country.
The steel firm began buying shares shortly after midnight--as soon as it was legally able--to consummate the second-largest merger in U.S. history. The largest was E. I. du Pont de Nemours & Co.'s $7.8 billion takeover of Conoco Inc., where Mobil was also the loser.
Approximately 21 million more shares were offered to U.S. Steel than it had sought, which means tendering shareholders will receive the $126-a-share U.S. Steel price for an estimated 58 of each 100 shares tendered. Other shares will be traded for U.S. Steel notes, which were valued yesterday at approximately $80. U.S. Steel said it will begin paying for the stock on Monday.
Mobil was noncommittal yesterday about what it might do in the wake of its defeat, having lost a last-ditch effort to block U.S. Steel on Wednesday. U.S. Steel reached an quisition agreement with Marathon's directors that was designed to stop Mobil.
In its Conoco and Marathon offers, Mobil was seeking to acquire domestic reserves that could be had at less cost through corporate acquisition than through exploration. The economics of such a merger still makes sense, said oil industry analysts. But they predicted that Mobil might try a different tack.
Although Mobil has filed papers with the Federal Trade Commission indicating that it might attempt to win control of U.S. Steel to try to gain from it Marathon's oil and gas reserves, such a step is considered unlikely because of the legal difficulties and costs involved.
More likely, Mobil might see a nonintegrated company--involved in only one phase of the petroleum industry--such as Superior Oil Co. Inc., Louisiana Land & Exploration Co. or General American Oil Co. Such a company probably would be priced closer to its true value than an integrated firm, however, so the reserves would cost more. Still another possibility is that Mobil would seek a friendly merger, possibly with an integrated firm such as Cities Service Co.
"It hasn't been proven that a friendly merger wouldn't work," said Bruce Lazier, an analyst who follows Mobil for Paine Webber Mitchell Hutchins.
"If you do a friendly merger, you have an incredibly strong ally," said Sanford Margoshes, an oil industry analyst for Bache Halsely Stuart Shields. "I think Mobil's next move is more likely than not to be a friendly takeover."
Margoshes said that the costs to Mobil in its recent takeover attempt were incalculable. "There are a lot of ways to measure costs--money, allocation of managerial time, provisions to meet the FTC's information requirements and intangibles such as the drain on top management involved," he said.
"There are also the opportunity costs. When you're spending time on this, you're not spending time on something else which, if you succeeded, would pay dividends."
"There is a lot of management distraction. Between this and Conoco, they've spent half of the last year on takeover attempts," another analyst said. "I don't think they're too concerned about their public image. They seem to like to have the image of the tough guy who goes after what he wants."
"In the short term, they spent a lot of money and got a lot of bad publicity," Lazier said. "But the real point is who laughs last. If they end up with a lot of reserves cheaply, they will be applauded. If they chase around and end up with nothing, it will have been in vain."