ExxonMobil grabs XTO.

Exxon Mobil (XOM) is swallowing XTO Energy (XTO) The numbers are mind numbingly large. A $330 billion market cap is buying a $28 billion market cap. The investor will find it very difficult to follow the numbers. Here is what the deal signals to the market place. Shale gas, which is unconventional but huge, commands a premium, if you do not have it. If you have shale gas you need huge amounts of capital to develop it.

The problem the majors have is asset replacement and the increasing cost of asset replacement. Exxon used its stock as a currency. But look at the relative dividend yields. Exxon was able to offer a double on yield. XTO was yielding around 1% at current prices (post deal announcement). Investors found this attractive.

So companies that have higher yields should also be able to close share exchanges on better terms. Did XTO pick the best deal?