ExxonMobil Is Eyeing a Potential $8 Billion Bet on Shell's U.S. Chemical Plants. Here's What It Means for XOM Stock.

Shell (NYSE:SHEL) has received interest from multiple bidders for its U.S. chemicals assets, including ExxonMobil (NYSE:XOM). According to a Financial Times report, Exxon is among the four remaining bidders for the assets, which could cost up to $8 billion. They're non-binding bids that represented various expressions of interest in these assets.

Here's a look at what it would mean for ExxonMobil investors if the energy giant won the bidding for Shell's U.S. chemicals assets.

Drilling down into the potential sale

Shell is looking to divest some of its underperforming assets, which include its U.S. chemical plants. The global energy giant currently operates four plants in the U.S. across Louisiana, Texas, and Pennsylvania. They produce chemicals used in plastics, detergents, and pharmaceuticals.

According to the Financial Times, four entities have submitted bids for these assets: ExxonMobil, the chemicals company LyondellBasell, the private equity firm Apollo Global Management, and the chemicals arm of the state-owned Kuwait Petroleum Corporation. Some of those bids were for the entire portfolio, while others were for only some of the assets.

The reported $8 billion potential price tag represents a steep discount to Shell's invested capital in the assets, driven by underperformance and the current cyclical downturn in the chemicals sector. Shell spent $14 billion alone to build its Pennsylvania plant, more than double the initial cost estimate. It has had operational and financial troubles since opening. The overall headwinds affecting its chemicals business have weighed on Shell's earnings in recent years, though improved chemicals margins in the second quarter of this year helped boost earnings.

A sale of its underperforming U.S. chemicals assets would enable Shell to sharpen its focus on its best assets. It recently agreed to sell its onshore European renewables platform to TotalEnergies.

What a winning bid would mean for ExxonMobil

If Exxon wins the bidding for Shell's U.S. chemicals assets, it would significantly expand the U.S. energy giant's domestic petrochemical footprint. That would enhance its scale advantages, enabling it to leverage its greater scale to get more out of these assets. A core aspect of Exxon's long-term strategy is delivering structural cost savings, which it could enhance by acquiring assets that would increase its scale and enable operational synergies. Further, it would do so at a significant discount to replacement cost. It would be buying assets near the cycle's low point, which is ideal timing because it would enable the company to capitalize on the next cyclical recovery and expansion.

A deal for Shell's U.S. chemicals assets would also enable ExxonMobil to continue to diversify beyond oil and gas. Exxon already has a meaningful product solutions portfolio (energy, chemical, and specialty products) that it's investing heavily to expand, including new products like Proxxima. Exxon currently aims to deliver $9 billion in earnings growth from its product solutions businesses by 2030, at constant margins relative to 2024, driven by investments to expand its high-margin products and achieve structural cost savings.

A potential deal looks like a good strategic fit

ExxonMobil is reportedly one of four bidders for Shell's chemicals assets. It might not emerge as the winning bidder, given the competition. It's also possible that even if it has the highest bid, Shell opts to hold on to the assets in hopes that the continued recovery in the chemicals market will enable it to fetch a higher price in the future.

However, if Exxon wins the bidding, it looks like a very smart strategic acquisition. It would meaningfully expand its domestic chemicals business at an attractive price. That greater scale would provide opportunities to capture synergies that could make its entire chemicals business even more profitable in the future. That makes this potential deal an interesting one for ExxonMobil investors to keep an eye on, as it could further enhance the already strong long-term investment thesis that makes it a top oil stock to buy.

Matt DiLallo has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.