BP Amoco's £17bn Deal with Arco Appears to be a Takeover

The £17bn agreed deal between BP Amoco and Arco is shaping up to be more of a takeover than a merger. Following a dismal 1998 with profits slumping 65% to £370m, California-based Arco asked BP to take over the company just days after BP's £67bn link with Amoco. The deal, which is expected to be completed in late summer, will see Arco's top managers retire or receive big payoffs, with some 2,000 jobs at risk as part of the £600m-a-year savings target.

Key Takeaways:

• The deal between BP Amoco and Arco is worth £17bn and is expected to provide £600m-a-year savings, resulting in 2,000 job losses.
• Arco's top managers will retire or receive big payoffs, while the company's current directors will all leave the board.
• BP Amoco's chief executive, Sir John Browne, hopes to extract significant cost savings by "ring-fencing" Arco and maintaining a separate management team.
• The deal is expected to provide 13% of US petrol sales for the new group and will make the company a major player in the US market, with a target completion date set for late summer.
• The deal is seen as a strategic move to enable BP Amoco to "come of age" in gas, US retail, and Asia, with Browne highlighting Arco's Indonesian gas as a "crown jewel".
• The shares have been trading at a high multiple, with the stock price down 39p to 1009 1/2p and rated above Shell at a steep 25-times earnings.

Statistics:

• Arco's 1998 profits slumped 65% to £370m.
• The deal between BP and Arco is worth £17bn.
• £600m-a-year savings are expected to be achieved through the deal.
• 2,000 jobs are at risk as a result of the deal.
• BP Amoco's chief executive, Sir John Browne, aims to achieve significant cost savings through the deal.
• The deal is expected to provide 13% of US petrol sales for the new group.

Sources:

• BP Amoco press release (exact date not provided)
• The Times (source citation not provided)