They announced their engagement last December, but Exxon Corp. and Mobil Corp.'s $83.9 billion union has yet to win the blessing of antitrust enforcers, and the wedding has been delayed for months.
That means nail biting for thousands of employees who will be reassigned or laid off after the merger is completed. And more than 1,700 service-station owners and operators are nervously waiting to learn whose gasoline they will sell after they sever their relationships with Mobil or Exxon, part of a vast divestiture demanded by regulators.
So, what's taking so long?
Principally, it's complications brought on by the Federal Trade Commission, which insists that Exxon sell its interests in every station from New York to Maine, and that Mobil do the same with its stations from New York to Virginia.
And not just any buyer will do. The FTC is insisting on players--though it would prefer that one company buy the whole lot--strong enough to compete vigorously with a combined Exxon-Mobil, particularly in the Northeast, where the bulk of the divestitures are to occur. Only a handful of companies fit the bill, including Tosco Corp., Getty Petroleum Marketing Inc., Conoco Inc. and Amerada Hess Corp. Several companies are interested, and Tosco has already visited the FTC.
The proposed deal's gargantuan scale is slowing matters, too. Exxon and Mobil have handed over about 20 million pages of internal documents to antitrust enforcers, according to sources, a record haul of pages that were sifted by dozens of legal temps in a production worthy of Cecil B. DeMille. The photocopying bill alone ran into the millions of dollars.
But the negotiations aren't merely bogged down in paper, according to sources. The companies and the FTC are engaged in an elaborate, multilevel chess match complete with thrusts, retreats and sacrifices. And since each week of delay is costing Exxon and Mobil dearly, the longer this game plods on, the stronger the government's position becomes.
FTC officials declined to comment, as did representatives of Exxon and Mobil. But a picture of the bartering emerges from antitrust lawyers and oil industry watchers, two groups eagerly following talks to create the largest oil company in the world.
Exxon and Mobil must persuade the FTC that a viable rival is lined up and eager to purchase the company-owned gas stops. An upstart or a company looking to resell the stations for a quick profit won't cut it.
The prospective buyers have little reason to rush. Though Exxon-Mobil will most likely price its divested filling stations and franchise agreements to move, buyers will know that the longer they wait, the more desperate the companies get--which could mean even deeper discounts. And typically in such a situation, the purchaser wants time to convince staffers that it could compete even more vigorously if the merging parties were compelled to sell off more assets.
"If you're Tosco, you go to the FTC and say, 'We could really use another 100 stations in order to make a go of it,' " said one Washington lawyer.
Even selling the stations is a tricky matter, however. The Petroleum Marketing Practices Act prohibits oil companies from arbitrarily canceling their franchise agreements with service stations, a rule that could give station owners the grounds to sue if they are forced to switch brands on terms they don't like.
The inner workings of the FTC do little to streamline the process. Exxon-Mobil must first win over the staff, then win over the bureau of competition's director, Richard Parker, who oversees the staff. After that's done, Parker must sell the package to the agency's five commissioners.
That's typically a cinch because the agency's powerful chairman, Robert Pitofsky, signals throughout negotiations whether he and the votes of three commissioners who reliably follow his lead are on board. But there's more suspense when it comes to oil deals. Pitofsky has demonstrated a growing anxiety about the pace of consolidation; last year he instructed his staff to tack on additional demands to the proposed British Petroleum-Amoco merger. The deal was approved only after BP-Amoco agreed to shed 1,600 stations in 30 markets.
"Pitofsky has a bee in his bonnet about gas stations," another lawyer said. "With BP-Amoco he told the staff, 'I want gas stations, and I want a lot them.' "
So the bar has been rising for oil deals. Exxon-Mobil are being heavily scrutinized, in part, because they started to tango so late in the dance.
Why don't Exxon and Mobil just walk away from the table? They could consummate their deal without federal approval, but that's risky. The FTC would almost certainly ask a federal judge for a preliminary injunction to block the merger. And if that didn't work, the agency could begin an administrative trial in its very own courtroom. If the companies lost there--and the agency's in-house record is impressive--they could be forced to unravel their combination two years from now.
In sum, short of declaring war, Exxon and Mobil have little choice but to bluster, cajole, plead, haggle and wait. After predicting a settlement would occur in late September, then October, executives now have their sights on November.