Mon. Dec 4th, 2023
Analysis: The US will struggle to block the politically unpopular Exxon mega deal

Written by Diane Bartz and David French

(Reuters) – The White Home might have blamed Exxon Mobil for rising vitality costs that harm shoppers, however it’ll face difficulties in thwarting the biggest U.S. oil producer’s takeover of Pioneer Pure, 5 legal professionals and antitrust consultants mentioned on Friday. Assets for $60 billion.

Reuters reported on Thursday that deal negotiations between Exxon and Pioneer are at a complicated stage however haven’t but led to an settlement. The acquisition would give Exxon possession of the biggest producer within the largest US oil discipline.

US President Joe Biden criticized vitality firms for rising their earnings with the rise in gasoline costs, and his administration specifically criticized Exxon for not rising manufacturing regardless of its file earnings.

The White Home wrote to FTC Chair Lina Khan in 2021 asking her to scrutinize offers within the sector for “anti-consumer conduct,” and the antitrust watchdog subsequently slowed approval of a number of of them whereas it reviewed them.

These transactions had been ultimately allowed to finish, and the regulator has not filed a lawsuit to thwart an oil and fuel manufacturing deal since 2000.

Attorneys and consultants interviewed mentioned the FTC will face an uphill battle in difficult Exxon’s try to take over Pioneer.

It is because oil and fuel firms have been efficient in emphasizing that mergers in the US alone are unable to stifle competitors, as a result of commodity costs are dictated by the forces of provide and demand in an enormous world market.

Oil and fuel offers like Pioneer’s, which contain manufacturing and exploration, are simpler to defend underneath antitrust regulation, mentioned Andre Barlow, an antitrust legal professional with Doyle, Barlow and Mazard PLLC.

“This isn’t a refining deal or a retail deal, which is usually the primary driver of antitrust threat. These are the offers the place we see issues,” Barlow mentioned.

The White Home and Federal Commerce Fee declined to remark. Exxon and Pioneer didn’t reply to requests for remark.

Political stress was mounting on the Federal Commerce Fee on Friday to research any settlement reached by Exxon and Pioneer.

Democratic Senator Sheldon Whitehouse criticized Exxon for utilizing cash it earned from “manipulating a corrupt inner cartel… to double down on its efforts to pollute the planet, pushing extra prices and dangers onto shoppers.”

Antitrust consultants agreed that though Exxon and Pioneer had a superb probability of finishing their deal, they might face a prolonged antitrust evaluation due to the controversy it will generate.

“The latest American expertise is that oil and fuel offers of any notable measurement are intently scrutinized,” mentioned William Kovacic, a former chairman of the Federal Commerce Fee who teaches at George Washington College Regulation Faculty. “Gasoline costs are rising and that may make a distinction.”

Corporations like Exxon have felt emboldened to pursue large mergers after US regulators misplaced some high-profile makes an attempt in courtroom to dam mega offers in latest months, together with Microsoft’s $69 billion buy of Name of Responsibility maker Activision Blizzard.

Basin focus

The FTC has not objected to any main merger of oil and fuel producers since BP’s $27 billion acquisition of Atlantic Richfield in 2000. It sued to dam the merger and solely agreed to drop its objections after BP supplied to divest the oil manufacturing area In Alaska.

Exxon’s deal to purchase Pioneer would make it the biggest producer within the Permian Basin, which spans western Texas and jap New Mexico, based on consulting companies Wooden Mackenzie and Rystad.

Pioneer is the biggest operator within the Permian and accounts for 9% of whole manufacturing, whereas Exxon is fifth at 6%, based on RBC Capital Markets analysts.

The Federal Commerce Fee earlier this yr confirmed tolerance for mergers at one other U.S. oil discipline. It allowed Chevron, the second-largest oil producer in the US, to finish its acquisition of BDC Power in August for $7.6 billion, lower than three months after the deal was introduced, even because it centered on 40% of manufacturing within the Denver Basin. -Julesburg.

This represents extra consolidation than the Exxon-Pioneer deal would deliver to the Permian Basin.

There isn’t any telling how lengthy Exxon and Pioneer plan to finish their deal or whether or not the latter will negotiate hefty breakup charges to permit for the potential of regulators thwarting their merger.

Regulators should present they performed a complete evaluation of Exxon’s Pioneer deal given the important thing function the Permian Basin performs in vitality manufacturing, mentioned David Cass, a professor of finance on the College of Maryland and a former antitrust economist on the Federal Commerce Fee.

“(The pelvis) is a vital issue on this case,” he mentioned.

(Reporting by Diane Bartz in Washington, D.C. and David French in Atlanta; Further reporting by Mike Stone in Washington, D.C.; Modifying by Greg Roumeliotis and Margarita Choi)

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