HEARD ON THE STREET: BP A Deal Too Far for Exxon

By Liam Denning A DOW JONES COLUMN Even for Exxon Mobil, $48 billion is a big number. That is the drop in BP's market capitalization, relative to its peers, since disaster struck in the Gulf of Mexico on April 20. If--and it is a big "if"--the market has overreacted, then Exxon could acquire a world-class rival at a bargain price. But even assuming Exxon were now comfortable with the risk of catching a falling knife of epic proportions, huge obstacles to launching a successful unsolicited offer remain. First, even if, as a news report suggests, the White House has given a nod to Exxon that it is now open season on BP, how would this play in London, where BP is headquartered? The spectacle of a U.S. company acquiring what was the U.K.'s largest company after the latter's share-price fall was helped along by political rhetoric out of Washington might test even London's famously tolerant attitude toward foreign takeovers. The politics don't end there. Synergies are hard to come by in integrated oil mergers, except by cutting jobs. Exxon today employs roughly the same number of people it did when it merged with Mobil in 1999, effectively shedding the equivalent of the latter's 41,500 employees; in the meantime, profits have soared. That wouldn't play well on either side of the Atlantic. Exxon would also have to consider another big number: $30 billion. That is the decline in Exxon's own market cap relative to rival Chevron since announcing its last big deal, the takeover of XTO Energy. With investors wary already about realizing benefits from that last takeover, Exxon should think twice about springing an even bigger one on them. (TALK BACK: We invite readers to send us comments on this or other financial news topics. Please email us at TalkbackAmericas@dowjones.com. Readers should include their full names, work or home addresses and telephone numbers for verification purposes. We reserve the right to edit and publish your comments along with your name; we reserve the right not to publish reader comments.) (END) Dow Jones Newswires July 12, 2010 13:40 ET (17:40 GMT)