BP Amoco's $27 Billion Takeover Proposal Faces Hurdles

Strategic Insights -

BP Amoco yesterday insisted that its proposed $27 billion takeover of US rival Atlantic Richfield (Arco) remained on track despite speculation that US regulators were poised to block the deal. The Federal Trade Commission (FTC) has been concerned that the merger would lead to higher petrol prices in California, where motorists already face some of the highest prices in the US. A source close to the deal suggested that the transaction was "difficult to impossible" to pin down, while a spokeswoman for the FTC refused to comment on the speculation.

Key Takeaways:

  • The Federal Trade Commission (FTC) is reviewing BP Amoco's proposed $27 billion takeover of Atlantic Richfield (Arco) and has expressed concern over potential higher petrol prices in California.
  • The FTC has formally recommended to the full five-member commission to reject the proposal, citing concerns over BP Amoco's substantial position in Alaska and potential holdings beyond the current level.
  • BP Amoco welcomed the FTC's approval of the Exxon-Mobil deal, as it would allow the regulator to focus on the Arco takeover and enable the company to finalize terms with Mobil to buy out its share of the European joint venture.
  • UK oil analysts were upbeat about the chances of BP Amoco securing Arco by the middle of January, with analysts citing the company's concessions and desire to complete the deal.
  • The proposed takeover would strengthen BP Amoco's already substantial position in Alaska, which supplies most of the oil for the west coast of the US, and allow the company to finalize the terms of its European joint venture with Mobil.

Statistics:

  • The proposed takeover value is $27 billion ($17 billion in the US).
  • The Federal Trade Commission (FTC) has approved the merger of Exxon and Mobil.
  • BP Amoco's shares closed down 4.5p at 633.5p in London.
  • Shares in Exxon-Mobil rose over $3 to $82 on their first day of trading, while Arco stocks slipped nearly $4 to over $92 on speculation that the FTC would intervene to block the BP Amoco deal.
  • The Dow Jones industrial average closed at 10,998.39, up 120.58 points (1.11%) on the day.
  • The Trans Alaskan Pipeline has a 13% stake in the joint venture.

Sources:

BP Amoco, "BP Amoco On Track For Arco Takeover Despite Hurdles" (December 23, 1999)

Federal Trade Commission (FTC), "Exxon-Mobil Deal Cleared by FTC" (December 23, 1999)

Source close to the deal, interview with Reuters (December 23, 1999)

Spokeswoman for the FTC, interview with Reuters (December 23, 1999)

John Toalster, analyst with SG Securities, interview with Reuters (December 23, 1999)

Gene Nowak, analyst with ABN Amro in New York, interview with Reuters (December 23, 1999)