Mobil Corp., the nation's second-largest oil company, yesterday announced a $3.4 billion bid to take over 16th-ranked Marathon Oil Co. and its valuable refining properties and U.S. petroleum reserves.
There was no immediate comment from Marathon's headquarters in Findlay, Ohio, but financial analysts predicted Marathon would resist.
Mobil has offered to pay $85 a share for up to 40 million shares of Marathon common stock, about two-thirds of the available shares. The offer is conditioned on Mobil's obtaining at least 30 million shares by Nov. 11.
This was the second time in three months that Mobil has attempted to take over another oil company. In August, Mobil lost the bidding war for Conoco Inc., the nation's ninth largest oil company, despite an $8.8 billion offer.
Sales of Marathon stock were halted at $67.13 a share on the New York Stock Exchange after Mobil's announcement.
There was no reaction yesterday from the Justice Department's antitrust division or the Federal Trade Commission, either of which could oppose the takeover if they concluded it posed a significant anti-competitive threat. Mobil chairman Rawleigh Warner Jr. said in a statement that the company sees no antitrust obstacles to the acquisition.
Rep. Peter Rodino (D-N.J.), chairman of the House Judiciary Committee, said the Mobil bid "raises troublesome antitrust questions." Rodino added that "although Marathon itself is not a giant in this industry, a green light to horizontal acquisitions of this sort within the same industry could touch off a wave of takeovers involving other small and medium-sized firms whose presence in this critical energy industry is an important competitive check on the giant multinationals."
Mobil, with sales of $59.5 billion last year, was the second-largest U.S. industrial firm, as well as the No. 2-ranked oil company in the country. Marathon, with sales totaling $8.1 billion, was the 39th largest U.S. industrial firm in 1980. Mobil's share of U.S. gasoline sales is 6 percent, while Marathon's is 2.3 percent. Their shares of crude oil production are even less.
However, the acquisition of Marathon's substantial refineries would give a big boost to Mobil's production capacity for gasoline and other petroleum products. Currently, Mobil is the seventh-largest refiner and Marathon is ninth largest. A combination of the two would rank the company second or third, behind Exxon and Chevron. Industry analysts also noted that Marathon's 683 million barrels of underground crude oil reserves in the United States are a rich prize for Mobil, which has large holdings in the Middle East.
But Mobil may not get hold of Marathon without a fight.
For more than a week, Texas oil interests have been buying up Marathon stock at a fast pace, led by Sedco Inc., a Dallas-based oil drilling firm, and members of the wealthy Bass family of Ft. Worth. Sedco--once headed by Texas Gov. William P. Clements and now run by his son, W. G. Clements--owns at least 6.7 percent of Marathon's stock and the Bass family, headed by Percy R. Bass, owns 5.1 percent, said Alan Edgar of the Dallas investment firm Schneider Bernet & Hickman, Inc. Both holdings were recently disclosed to the Securities and Exchange Commission.
Edgar said that as much as 20 percent of Marathon's stock may be in the hands of a few large investors who may not be impressed by Mobil's offer of $85 a share. "That's enough to kick this off," he said. Marathon's oil and gas reserves are valued at $120 to $200 a share by investment analysts, and the acquisition, at Mobil's price, would be a "steal," according to Sanford Margoshes, an oil industry analyst at Bache Halsey Stuart Sheilds, Inc.
However, Mobil's sudden moves yesterday on several fronts have left it in a much stronger position than it had in the fight for Conoco last July and August, said Robert Morris of Drexel Burnham Lambert Inc., a New York investment firm. In addition to notifying the antitrust agencies of its bid yesterday, Mobil launched legal action in five states seeking federal court orders barring the states from blocking the acquisition.
Warner said, "We are seeking to contact Marathon's management to arrange a prompt meeting" to "complete this acquisition in a constructive manner."
Mobil lost the Conoco competition when the Justice Department delayed approval of its bid, permitting E. I duPont de Nemours & Co. to win out.
The loss was hard for Mobil to take, said Morris. "They've moved quickly here," he added..
Several oil industry critics yesterday urged antitrust chief William Baxter and the FTC to block Mobil. Sen. Howard H. Metzenbaum (D-Ohio) accused Baxter of "benign indifference" to mergers, saying the administration has "sent a clear signal to the nation's businesses that when it comes to mergers, practically anything goes."
Justice Department spokesman said yesterday it wasn't settled whether the department or the FTC would review Mobil's bid for Marathon.