Thank you for sharing!

Your article was successfully shared with the contacts you provided.
Phillips Petroleum Co.’s $7 billion acquisition of Tosco Corp. is expected to win antitrust approval, though legal experts said the companies are unlikely to meet their goal of closing the deal in the third quarter. “Six months is a little short for a major oil merger,” said one Washington, D.C., lawyer familiar with the industry. “Just look at the history of Exxon-Mobil or BP-Arco.” The Federal Trade Commission took 11 months to investigate Exxon Corp.’s 1999 acquisition of Mobil Corp. and 12 months to review BP Amoco PLC’s 2000 purchase of Atlantic Richfield Corp. The deal also hits the agency at an awkward time. A source said the agency’s investigation of San Francisco-based Chevron Corp.’s $36 billion acquisition of New York-based Texaco Inc. is starting to gain momentum. That deal was announced in October. An agreement resolving antitrust objections to the transaction is not expected any time soon. “This is still a pretty new merger,” the source said. That means many of the agency’s experts on the oil industry must split their time between the two deals, which could slow the investigations of both transactions. “The FTC is overburdened,” the Washington, D.C., lawyer said. “They are not going to be able to move things forward that rapidly.” An FTC spokesman could not be reached for comment, but former FTC Commissioner Mary Azcuenaga said the agency is adept at bringing junior staffers up to speed quickly on an industry. “It is pretty easy to quickly tell people who might be new to the industry what they need to know,” she said. Further complicating the review is the expected departure of FTC Chairman Robert Pitofsky, whose term expires in the fall. President Bush is widely expected to nominate George Mason University law professor Timothy Muris to replace Pitofsky, who would remain in charge until the president’s nominee is confirmed. Muris, likely to easily win Senate approval, is expected to view corporate mergers more agreeably. If the agency and the companies stall in negotiations, Phillips may well wait for Muris to take office. That would further delay the deal. Negotiations with the FTC could be difficult because the agency has become increasingly worried about consolidation in the oil industry. In its November 1999 order approving the Exxon-Mobil merger, the agency cautioned that it would view future deals with skepticism. Phillips spokeswoman Kristi DesJarlais said the companies have some overlaps in their retail operations but noted they are not significant enough to put the merger at risk. “We believe the transaction will receive regulatory clearance,” she said. Old Greenwich, Conn.-based Tosco operates refineries and retail outlets primarily along the east and west coasts, while Bartlesville, Okla.-based Phillips is concentrated in the middle of the country, DesJarlais said. In a conference with analysts Monday, Phillips Chairman Jim Mulva said the companies alone were too small to compete effectively. But the merger will catapult them into the No. 3 position in the U.S. market. “We will have the scope and scale to be a major competitor,” he said. Following up, Tosco Chairman Tom O’Malley said the deal gives them the critical mass to more profitably serve their retail customers. “You don’t have to charge consumers a higher price,” he said. “You simply have to lower costs.” Both executives’ comments appear to indicate that the firms will raise the efficiency defense in talks with regulators. Under this policy, anti-competitive deals are acceptable if the efficiencies gained from the merger significantly outweigh the competitive harms from the transaction. William Baer, who ran the FTC’s competition bureau during the early stages of the Exxon-Mobil merger, said the agency will likely examine how the deal affects the markets for refining, pipeline distribution, wholesale distribution and retail operations. “There are four levels, and you are going to have to look at each market in those levels,” said Baer, a partner at the Washington, D.C., law firm of Arnold & Porter. One potential hang-up for an FTC deal could be finding a buyer for divested assets, said Baer, who noted that all the major players have recently been involved in mergers. “There may be a theoretical fix, but there needs to be a buyer,” he said. “That is going to be a challenge.” Phillips said it has retained New York law firm Wachtell, Lipton, Rosen & Katz to handle the deal, led by partners Andrew R. Brownstein and Wayne Yu. Tosco is using New York law firm Stroock & Stroock & Lavan LLP, led by partner Martin Neidell, who said the company expects to name a separate antitrust counsel. Copyright (c)2001 TDD, LLC. All rights reserved.

This content has been archived. It is available through our partners, LexisNexis® and Bloomberg Law.

To view this content, please continue to their sites.

Not a Lexis Advance® Subscriber?
Subscribe Now

Not a Bloomberg Law Subscriber?
Subscribe Now

Why am I seeing this?

LexisNexis® and Bloomberg Law are third party online distributors of the broad collection of current and archived versions of ALM's legal news publications. LexisNexis® and Bloomberg Law customers are able to access and use ALM's content, including content from the National Law Journal, The American Lawyer, Legaltech News, The New York Law Journal, and Corporate Counsel, as well as other sources of legal information.

For questions call 1-877-256-2472 or contact us at [email protected]


ALM Legal Publication Newsletters

Sign Up Today and Never Miss Another Story.

As part of your digital membership, you can sign up for an unlimited number of a wide range of complimentary newsletters. Visit your My Account page to make your selections. Get the timely legal news and critical analysis you cannot afford to miss. Tailored just for you. In your inbox. Every day.

Copyright © 2021 ALM Media Properties, LLC. All Rights Reserved.