Exxon & XTO Merger Approved: Energy Mergers Galore Coming? (XOM, XTO, BJS, BHI, SLB, SII)

When Exxon Mobil Corp. (NYSE: XOM) announced that it was going to acquire XTO Energy Inc. (NYSE: XTO)for  $31 billion in an all-stock transaction ($41 billion after debt assumption; with 0.7098 in the XOM/XTO ratio), the first thing that came to mind under the new administration was risks in antitrust issues.  The Obama administration was believed to be, and is still believed to be somewhat, much more stringent when it comes to approving mergers and acquisitions.  But that appears to be an issue which has come and gone.  Hitting the tape this afternoon is that the merger has received the necessary approvals.

BJ Services Company (NYSE: BJS) and the pending acquisition by Baker Hughes Inc. (NYSE: BHI) has yet to face approval as the companies this week announced “The DOJ has raised issues with regard to the overlap between the stimulation/sand control businesses of Baker Hughes and BJ Services in the U.S. Gulf of Mexico.”

As far as what Exxon Mobil said in its filing:

• The applicable waiting period provided under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, with respect to the pending merger by which XTO Energy Inc. will become a wholly-owned subsidiary of Exxon Mobil Corporation, expired on March 15, 2010, without the issuance of a second request.   The Dutch Competition Authority provided a regulatory clearance of the pending merger on March 9, 2010.  Closing of the transaction remains subject to approval by the shareholders of XTO Energy and the satisfaction (or, to the extent permitted by applicable law, waiver) of the other conditions provided in the merger agreement among the parties.

We have gone as far as predicting that Exxon Mobil would hike its dividend in 2010, but the merger here may get in the way of that notion if you consider how much stock it has repiurchased.

The acquisition by Schlumberger Ltd. (NYSE: SLB) of Smith International Inc. (NYSE: SII) is the newest of the three mergers and has yet to hear any formal decisions.  Still, it seems that the energy patch is ripe for a new wave of M&A.

It seemed that during the private equity boom that mergers only brought on more mergers.  This is true regardless of private equity.  The notion that this expiration period has passed is a strong signal that cross mergers between oil and gas for larger economies of scale are going to be approved.  If Exxon Mobil, the #1 by far on our 24/7 Wall St. Real-Time 500 by market cap, can get approval to buy a large gas producer then any other major domestic fully integrated or exploration & production player can too.

JON C. OGG