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Phillips Petroleum Corp. closed Monday on its $9.3 billion acquisition of Tosco Corp. after the Federal Trade Commission said it would not challenge the oil industry merger on antitrust grounds. This is the first of the recent “Big Oil” deals where the companies did not have to sell significant assets to secure regulatory approval. In the previous three mega-mergers in the past two years, the FTC required divestiture of service stations, refineries and pipelines. Approval of the deal was a major dose of confidence for Wall Street, said Tom Burnett, president of New York-based Merger Insight, a unit of Wall Street Access. It signifies that the antitrust agencies are back at work despite the attacks on the World Trade Center and the Pentagon, he said. It also permits arbitrageurs to close their stock positions on the deal and redeploy capital elsewhere, he said, which will help the market recover after being closed for four days. The FTC’s decision to clear the Phillips-Tosco merger also further bolsters Wall Street’s view that the FTC, under Chairman Timothy J. Muris, wants to move quickly on deals and not demand unnecessary divestitures, he said. “This was a victory for common sense,” Burnett said. “This was a sign on the regulatory side that things will be more rational.” Yet it is unclear how much more concentration the FTC would permit. The agency was scheduled to release a statement on the deal early in the day, but put that plan on hold because all five commissioners needed to approve it. In a speech Monday to the American Bar Association’s antitrust section, FTC Competition Bureau director Joe Simons suggested parts of the oil industry were highly concentrated. “If the deal involves those areas, you could have problems,” Simons said. But the regulator declined to specify which segments of the oil industry to which he was referring, and he did not rule out any potential deals. “You have to look at a specific transaction in front of you,” he said. Each Tosco share will be converted into 0.8 shares of Phillips, which now will own 10 U.S. refineries and will market its products through 12,400 branded outlets, such as Phillips 66 and 76, and Circle K. The stock portion of the deal was worth $7.28 billion based on Phillips’ stock price Monday afternoon. The deal also calls for Phillips to assume $2 billion of debt. “We remain confident that we have taken the best course of action for our company’s future,” Phillips Chairman Jim Mulva said in a statement. “With our balanced portfolio of assets, scale, and financial flexibility, we can deliver the growth and value that shareholders expect.” Bartlesville, Okla.-based Phillips expects $250 million in cost savings for 2002 from the purchase, which is the company’s second major deal. Last year it profited from British Petroleum’s acquisition of Atlantic Richfield Co. The FTC required BP to unload all of Arco’s Alaskan assets, which Phillips subsequently bought for $7 billion. The company appears to have ruled out further acquisitions for now. “Moving forward, our focus will be on integrating and developing synergies in our refining, marketing and transportation businesses, and further growing our worldwide exploration and production position,” Mulva said in the statement. Copyright (c)2001 TDD, LLC. All rights reserved.

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