ExxonMobil Provides Merger Update / Benefits Greater Than Previously Forecast
15.12.1999, 15:45
New York (PROTEXT) - Exxon Mobil Corporation (NYSE: XOM)Chairman Lee Raymond today briefed investors and the media on thenew ExxonMobil organization, and the updated outlook for mergerbenefits. "We have moved from a year of planning to combine Exxon andMobil, to actually operating as a merged company, ExxonMobil,"Raymond said. "When we announced plans for the merger -- about a year ago --both companies recognized this was a once in a lifetimeopportunity. Since that time, we have further refined theopportunities and benefits available to the merged company. Whilewe were excited about the prospects for ExxonMobil in 1998, weare even more positive today," Raymond said. "This enthusiasm isshared by the many Exxon and Mobil people who have worked so hardto make this merger a reality." Raymond commented that "the synergy benefits of the merger areexpected to be greater than previously forecasted and are likelyto be realized sooner. Our enthusiasm, however, goes beyondnumbers. What we see is a company positioned exceptionally wellfor the future. . .in terms of its talented workforce, itsexisting portfolio of high quality assets, and its technologicalleadership. These characteristics coupled with strong financialresources place ExxonMobil in a unique position to capture manyof the excellent opportunities likely to be available to ourindustry over the coming years." Transition Efforts "Lou Noto said it best last December. The merger of Exxon andMobil was born of opportunity, not necessity," Raymond noted."Our clear objective has been to maximize the value of thatopportunity for our shareholders by creating the premier companyin the industry," he added. "We are moving from amultifunctional, geographically based regional structure to 11global functional businesses, each responsible for guiding theiroperations and stewarding results on a worldwide basis." Raymond said that the task of combining two companies the sizeof Exxon and Mobil "was simplified by the inherent compatibilityand shared values of the two organizations. This compatibilitywas abundantly evident on the transition teams, which functionedextremely well, building strong confidence in how well theorganizations will blend together." As a result of the merger and other identified organizationalefficiency steps, Raymond said staffing requirements are expectedto decline by almost 16,000 people between year-end 1998 andyear-end 2002. About 2,000 of that reduction already occurred in1999, prior to completion of the merger. Executive positions willdecrease by more than 1,000 or about one-third of the twocompanies' pre-merger totals. These staffing numbers do notreflect required divestments or any additional productivityimprovements in the base business beyond those alreadyidentified. "This is clearly the most difficult aspect of implementing amerger as large as this one," noted Raymond. "We certainlyappreciate the contributions all employees have made to Exxon andMobil over the years, and we have plans in place to help cushionthe impact on those who must separate." Merger Benefits Update Since the merger was announced in December 1998, Exxon andMobil have been designing the merged company and developing plansfor capturing near-term synergy benefits. "We now have a muchbetter understanding of what we can achieve and how to achieveit," Raymond said. A year ago, the companies expected pre-tax synergy benefits tobe significant at about $2.8 billion per year by year three ofthe merger. "Our current view is that near-term merger synergies will beconsiderably higher than we originally estimated," Raymond said."We expect the synergies directly attributable to the mergeritself to amount to $3.8 billion annually, on a pre-tax basis.This figure does not include any cost or margin improvements fromour traditional ongoing efficiency programs -- that would occurwith or without the merger. For instance, in 1999 the twocompanies' base business efficiency efforts will yield a $1.2billion reduction in cash operating costs compared to 1998. Thesesavings are not included in the $3.8 billion -- nor are theexpected results of similar efforts in 2000 and beyond. Inaddition, the $3.8 billion does not include any cost savingsassociated with divestments." Raymond noted that a key objective of the merger planningeffort was to achieve readiness to begin operating on a combinedbasis -- and start capturing synergy benefits -- rapidlyfollowing completion of the merger. "We have only just started toreview forward plans together," Raymond said. "But I am confidentthat we can achieve at least the $3.8 billion, and we can do itfaster than we thought at this time last year." Raymond noted that the merger is forecast to improve netincome by about $1 billion in 2000, with the positive impactrising to around $2.5 billion by 2003. These figures include theimpact of one-time restructuring costs and asset divestments. ExxonMobil expects to capture the full market value of theassets identified by the regulators for divestment. Salesproceeds from these assets are estimated to be in the range of$4-$5 billion. Raymond said that the earnings impact fromdivestitures was more difficult to estimate, "but current figuresindicate a net gain of around $1 billion after tax." He noted that the asset sales alone would likely add about $3billion to ExxonMobil's cash flow. "On a one-time basis, themerger should generate more like $3.5 billion in positive cashflow -- when you include the impact of reduced working capitalrequirements and restructuring costs." Raymond also stated that, "By year three, the merger isexpected to provide recurring positive cash flow of about $4billion per year, reflecting the after-tax impact of synergybenefits and optimization of the merged company's capitalinvestment program." World Class Businesses In addition to the discussion of merger planning and theexpected financial benefits, Raymond provided an overview ofExxonMobil's worldwide operating organizations. His commentshighlighted the strategic fit -- both functionally andgeographically -- between the assets of the two companies. Henoted ExxonMobil's excellent competitive position in the globalupstream, downstream, and petrochemicals businesses -- and placedspecial emphasis on the company's continued commitment totechnological leadership. In closing, Raymond noted that "While the merger willnecessarily result in many changes, it is important to rememberthat many things will remain the same -- the most important ofwhich are our fundamental strategies for generating superiorlong-term performance." CAUTIONARY STATEMENT: Projections, estimates, and businessplans described in this news release are forward-lookingstatements. Actual future results, including cash flow andearnings effects, synergy benefits, staffing impacts, and changesin capital productivity resulting from the merger, could differmaterially due to a number of factors. These factors includechanges in market conditions affecting the oil and gas industry,changes in law or government regulation, the outcome ofcommercial negotiations, our ability to integrate the businessesof Exxon and Mobil as planned and other factors discussed underthe heading "Cautionary Statement Concerning Forward-LookingStatements" in our Joint Proxy Statement/Prospectus dated April5, 1999. ots Original Text Service: Exxon Mobil CorporationInternet: http://www.newsaktuell.de Contact: Tom Cirigliano ofExxon Mobil Corporation (USA) 972-444-1109 Web site:http://www.exxon.mobil.com
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