Sunday March 28, 9:10 pm Eastern Time
BP Amoco May Acquire Arco
LONDON (AP) -- Fresh off the completion of one merger,
oil giant BP Amoco (AN - news) is reportedly holding
talks to take over Los-Angeles-based Atlantic Richfield
Co.
The deal, worth about $25 billion, is expected to be
announced later this week after the boards of the two
companies vote on the deal, The Financial Times and
The Wall Street Journal reported.
If completed, the merger would be the latest integration in a rapidly consolidating oil
industry and the second acquisition for the former British Petroleum Co, which
completed its $57.6 billion merger with Chicago-based Amoco Corp. in December.
Both newspapers said the negotiations still could fall through. Any deal would have to be
approved by U.S. regulators.
Messages left at the companies' headquarters by The Associated Press were not
immediately returned.
Spokesmen for the Arco and BP Amoco operations in Alaska said separately that they
could not comment on rumors.
It's unclear exactly how much the deal would be worth, though based on Friday's closing
stock prices of $65.37 1/2 on the New York Stock Exchange, Arco has a market
capitalization of about $21 billion. The Financial Times quoted people close to the
negotiations as saying that Arco was looking for a premium of 20 percent, putting the
price tag at about $25 billion.
Shares of BP Amoco rose $1.12 1/2 to $100.43 3/4 in trading Friday on the New York
Stock Exchange.
One main advantage of the link is savings and improved efficiency that may be gained
by uniting the two companies' Alaskan operations.
In Alaska, BP Amoco and Arco jointly operate the 13-billion barrel Prudhoe Bay field,
the 800-pound gorilla of U.S. oil discoveries. But from a peak in 1988 of 2.1 million
barrels a day, production has fallen off to about 1.2 million barrels daily.
While BP Amoco now produces more oil than Arco in Alaska, it's Arco that has the best
future prospects. The company expects to have its 360-million barrel Alpine field
operating in about two years, and it also is eyeing acreage in the vast National
Petroleum Reserve-Alaska west of Prudhoe for additional opportunities.
About 80 percent of the state's revenues come from oil, and most of that is generated by
Arco and BP. A combined BP-Arco company would own more than 70 percent of the
trans-Alaska pipeline.
Arco is the seventh-largest U.S. oil company, earning $452 million in 1998 on revenue
of $10.3 billion. It has more than 1,700 gas stations in the Western U.S. and British
Columbia.
It has interests in places like Indonesia, the Gulf of Mexico, the North Sea and Africa. But
supply and sales are centered in Alaska and California.
Low crude prices, however, have hurt Arco; since October, it has announced plans to lay
off 1,200 employees.
BP Amoco, the world's third-largest oil company, sells its products through a network of
about 27,000 stations.
Since the BP-Amoco deal was completed, the new company has announced a total of
10,000 in merger-related cuts, roughly 10 percent of the combined company's work
force.
Overall, the combined BP Amoco earned $4.65 billion on revenue of $83.7 billion in
1998.
Oil companies worldwide have been devastated by the low cost of oil, causing them to
lay off employees and find other ways of savings -- including entering into mergers.
Exxon Corp. (NYSE:XON - news) announced in December it would purchase Mobil
Corp. (NYSE:MOB - news) in a deal currently valued at $75.7 billion that would combine
the two biggest U.S. oil companies and create the second-largest private oil company in
the world, behind the Royal Dutch/Shell Group.
Also in December, French petroleum giant Total and Belgian refiner Petrofina
announced plans to merge in a deal that would create the world's fifth-largest oil
company.
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