Mobil Corp., in a tough bidding war with U.S. Steel to acquire Marathon Oil, yesterday told the Federal Trade Commission it plans to purchase up to 25 percent of the stock of the steel company.
The nation's second largest oil company said it was seeking clearance to buy up to slightly more than 22 million shares of the nation's largest steel company.
U.S. Steel immediately denounced the action as an attempt to "coerce U.S. Steel into abandoning its acquisition of Marathon Oil" and warned investors "not to be misled by Mobil's reckless action." Marathon shareholders, who have overwhelmingly tendered their shares to U.S. Steel, have until midnight Monday to withdraw them.
At the approximately $30 a share at which U.S. Steel last was trading, Mobil's plan to purchase 25 percent of the steel maker's stock would cost only about $669 million--a relatively small amount compared with the $6.5 billion offer Mobil has made for Marathon. The price of U.S. Steel stock is likely to rise because of the announcement, however.
Mobil's purpose in seeking substantial control of U.S. Steel would be to gain Marathon's oil and gas reserves even if the steel company wins control of Marathon. The reserves are at the heart of Mobil's bid for Marathon which has been blocked by antitrust concerns over possible reduced competition if the refining, marketing and transportation operations of the two companies were combined.
The FTC, which said Tuesday it would seek an injunction against Mobil's takeover of Marathon as originally proposed, will have to review Mobil's proposed large block purchase of U.S. Steel for possible antitrust implications.
The commission or the antitrust division of the Department of Justice have a 30 day period to review the proposed purchase before Mobil may act. If either antitrust agency requests more information or documentation, the request triggers a second 20-day waiting period following compliance.
There was no trading in U.S. Steel stock yesterday on the New York Stock Exchange in anticipation of an announcement affecting its price. The announcement by Mobil came shortly after closing.
The announcement, foreshadowed last month when Mobil announced that it had purchased 450,000 shares of U.S. Steel, and speculation that Mobil would try to swallow U.S. Steel were greeted with skepticism by several oil and steel industry analysts who likened it to chain rattling.
But at least one analyst, Sanford Margoshes of Bache, Halsey, Stuart, Shields said he believed Mobil's chances of grabbing control of U.S. Steel were better than its chance of taking over Marathon. "Mobil's chances of overcoming obstacles and taking over Marathon directly are about one in four," Margoshes estimated.
In contrast, he gave the oil company a one-in-three chance of taking control of U.S. Steel. For one thing, it is less likely that Mobil would face competition in an attempt to seize control of a large share of U.S. Steel, he said.
Even skeptical analysts warned against underestimating Mobil's determination. "It's like the shark in Jaws," said one. "You never know where it's going to pop up."
Next Monday, Mobil also is expected to play another of the cards remaining in its hand by announcing a new tender offer for Marathon in cooperation with Amerada Hess. That offer is expected to top the second Mobil offer, which would pay $126 a share and exchange bonds for additional stock. That offer was valued at $6.5 billion.
Making a new offer would delay the date at which U.S. Steel could begin to buy Marathon shares.
Mobil did not mention in its notification of intent to purchase U.S. Steel stock any specific plans to try to acquire Marathon's oil and gas reserves, nor did it mention what might become of Marathon's marketing, transportation and storage properties if Marathon were part of the steel company if and when Mobil acquired a 25 percent interest. No other shareholder of U.S. Steel has more than a 5 percent interest in the company.
Because the stock is so widely dispersed, the possible purchase by Mobil of up to 25 percent of U.S. Steel's stock would probably be considered a controlling interest and have to meet the same antitrust standards that confronted Mobil in its Marathon bid.
The filing with the FTC does not bind Mobil to purchase stock, but says the company may do so if no antitrust obstacles are posed.
In other developments yesterday, a federal judge in Cleveland rejected Mobil's request to reopen a lawsuit and consider modifying an order that bars the marathon bid because of antitrust questions. Judge John J. Manos said Mobil's new proposal to spin off Marathon's marketing and transportation operations to Amerada Hess is not significantly different from an earlier proposal he rejected.