The $41 billion Exxon/XTO merger is moving forward, despite shareholder objections and an arguably permissive material adverse change (MAC) out clause. The latter takes on new meaning in light of the BP-induced controversy over messy energy extraction. With that said, things appear poised to move forward: the definitive merger proxy requesting XTO shareholder approval has been filed, the S-4 registration gone effective, and, together, Exxon and XTO Energy hope to create the largest U.S. natural gas company.

George R. Bason, Jr. and Louis L. Goldberg led Davis Polk & Wardwell in representing Exxon. XTO is represented by Skadden, Arps, Slate, Meagher & Flom with Roger S. Aaron, Stephen F. Arcano and Kenneth M. Wolff acting as lead counsel.

Important legal factors remain, however. Among these are shareholder lawsuits that appear to have been put to bed, regulatory approvals, and an arguably-permissive MAC out clause in light of threatened re-regulation of the energy industry. As the BP oil slick expands, so does threatened re-regulation of the energy industry, with a focus on messy energy extraction techniques. And this has got to have special resonance to XTO’s fractal drilling techniques for natural gas to the latter. Which brings us to the MAC clause: in addition to other standard language for material adverse effect, the agreement allows the merger to be terminated if “any applicable law enacted, enforced, promulgated or issued after the date of the merger agreement by any governmental authority (other than antitrust or other competition laws), that would reasonably be likely to result in “an adverse material effect.”

via Energy Watch: Legal Risks for Exxon-XTO Merger, in the Age of BP.