IRVING, Texas -- With most top positions in the new Exxon Mobil Corp. going to Exxon officials, and the company being based in Exxon's home of Irving, industry observers are betting it will be Exxon's personnel and strategy that come out leading the new entity's $20.8 billion in pension assets.
"Exxon will be the survivor here . . . they will be calling the shots eventually," said one of the funds' current money managers who asked not to be identified.
Exxon Corp., Irving, Texas, has $3.8 billion in its U.S. defined benefit plan and $9.5 billion in its defined contribution plan.
Fairfax, Va.-based Mobil Corp. has $2.5 billion in its U.S. defined benefit plan and $5 billion in its defined contribution plan. Both companies' defined benefit plans are fully funded.
The combined $20.8 billion in employee benefit assets would rank Exxon Mobil among the 50 largest funds in the country.
Officials at both companies say it's too early to discuss what might happen to the pension funds after the merger.
"We don't have specific plans at this point," said John DeLong, pension fund coordinator for Exxon. Mr. DeLong would not speculate when or if the Exxon and Mobil plans would become one.
"Sure, someone will lose in the investment world," said Joel Rich, senior vice president at New York-based Segal Co., referring to money managers. He expects that either the plans will be quickly merged or there will be a waiting period, while administration is centralized.
SIMILAR MIXES
The asset mixes of the defined benefit plans are fairly similar.
At Exxon, the defined benefit plan had an asset allocation as of Sept. 30 of 43.7% domestic stock; 26.4% domestic fixed-income; 22.1% international equity; 7% private equity; and 0.9% real estate.
Mobil's defined benefit plan, as of Sept. 30, has an asset mix of 40% U.S. stock; 26% domestic fixed income (21% investment-grade bonds, 4% high-yield bonds); 24% foreign equities; 4% emerging market equity; 5% emerging market debt; and 1% private equity.
Exxon's plan is heavily indexed. Of its total assets, 35% is in indexed domestic stocks, 25% in domestic indexed bonds and 22% in international indexed equity.
Mobil's domestic equity portfolio has 85% in large-cap equity, 60% indexed; and 15% in small-cap, all active.
Exxon uses 10 external investment managers and Mobil, 13. The funds share a fixed-income manager, J.P. Morgan Investment Management.
A source at Mobil said the company had been consolidating managers in the past few years and currently is reviewing managers.
THE DC PICTURE
In the defined contribution area, Exxon's plan has about 62% of its assets in company stock, 12% in domestic equities and 26% short-term bonds.
Exxon's stock has risen about $1.60 per share since the announcement Dec. 1, giving participants a gain of about $130 million.
In addition to company stock, four options are offered: an S&P 500 index fund; an extended market fund (based on the Wilshire 4500); a short-term bond fund; and a balanced fund, which includes U.S. stock, international stock and U.S. bonds. Barclay's Global Investors manages the plan's domestic equities; bonds are managed internally.
In contrast, Mobil's plan offers 11 options: three bond and money market types of funds; one balanced; one U.S. stock index fund; three active stock funds; one developed foreign equity fund; one emerging markets equity fund; and Mobil stock. The specific asset mix was not available.
According to the 1998 Money Market Directory, 53% of defined contribution assets were in company stock. Mobil's stock price rose about $4 since the announcement of the merger, giving employees a boost of about $126.4 million.
Merrill Lynch Asset Management is the semibundled provider for Mobil's defined contribution plan. Merrill Lynch manages the money market types of options and an index stock option. The rest of the defined contribution managers are: AIM Advisors, domestic equities; Franklin Advisers, domestic bonds; Jennison Associates, growth equities; MFS Institutional Advisors, U.S. stock; and Templeton International, emerging market and international equities.
One investment manager, who did not want to be named, speculated the defined contribution options for Mobil employees would stay relatively intact.
The stock options of both plans will need to be converted to merged company stock. Under the terms of the merger agreement, each share of Mobil stock will be converted into 1.32015 shares of Exxon. It is expected Mobil shareholders will own about 30% of the company, while Exxon shareholders will own about 70%.
PERSONNEL PUZZLE
Another piece of the merger puzzle will be personnel.
Exxon employs a total of 12 people in its benefit finance and investment area in the United States, including Mr. DeLong. The company manages roughly 42% of its defined benefit plan internally.
Mobil has five people in its pension investment group in Fairfax, overseen by Steadman Watson, manager of benefits finance. All of Mobil's assets are externally managed.
A source at Exxon said employees in all areas of both companies will be offered lucrative buyout packages. Relocating to Irving from Fairfax might not be attractive for some Mobil employees, even if they get the opportunity, according to the source.
Overseas, Exxon had $5.4 billion in pension assets in 14 different countries as of Dec. 31, 1997, and fewer than 20 staffers overseeing those plans. Mobil had $1.1 billion in defined benefit assets scattered in 12 foreign countries. Three people work overseas managing the foreign plans.
Officials at both funds said it was too early to know what, if anything, would happen with the foreign operations.
Exxon's defined benefit managers, as of Sept. 30, were: BGI and Geometry Capital Advisors, domestic equities; Aeltus Investment Management and BGI, international equities; Smith Barney Capital Management and J.P. Morgan Investment Management, domestic fixed income; Corporate Property Investors and JMB, real estate; and Horsley Bridge, HarbourVest International and Mellon Capital for limited partnerships.
Mobil's defined benefit managers, as of Sept. 30, were: Capital Guardian Trust Co., Bankers Trust, Rosenberg Institutional Equity Management, Lazard Freres & Co. and Fayez Sarofim & Co. for domestic equities; Capital Guar dian, Morgan Stanley Asset Management and Grantham, Mayo, Van Otterloo & Co., foreign developed equity; Capital Guardian, emerging market equities; Morgan Stanley, Salomon Brothers Asset Management and Grantham, Mayo for emerging market debt; Loomis Sayles & Co., MetLife, J.P. Morgan, State Street Research & Management Co., J.&W. Seligman and Putnam Investments, domestic bonds; and Pareto Partners, currency overlay.
