British Petroleum Acquires Amoco Corp. in Record-Breaking $49 Billion Merger

Strategic Insights -

British Petroleum, the world's third largest oil company, has announced plans to purchase Amoco Corp., a 1960s-era pioneer in the state's oilpatch, for $49 billion in a deal that would create an oil giant rivaling Royal Dutch/Shell Group and Exxon Corp. The combination, to be called BP Amoco PLC, would be the largest-ever industrial merger, eclipsing the recent agreement by Germany's Daimler-Benz to pay $40.5 billion for Chrysler Corp.

The merger would bring together two companies with combined sales of $108 billion in 1997 and profits of $6.8 billion, with a combined work force of approximately 100,000 employees. Of the combined work force, about 6,000 jobs - 6 percent - are expected to be lost, mainly in Houston, Texas, and Cleveland, Ohio, where both companies have offices. However, BP has stated that none of the job cuts would be in Alaska, where the company employs nearly 1,000 people.

The acquisition would strengthen BP's position in the global oil industry, increasing its total output and solidifying its presence in Alaska, where it already produces nearly 50,000 barrels of crude a day from the Endicott field. Alaska is now BP's most prolific oil province, accounting for four out of 10 barrels produced by the company worldwide.

Key Takeaways

  • The merger between British Petroleum and Amoco Corp. would create an oil giant rivaling Royal Dutch/Shell Group and Exxon Corp., with combined sales of $108 billion in 1997 and profits of $6.8 billion.
  • Approximately 6,000 jobs - 6 percent of the combined work force - are expected to be lost, mainly in Houston, Texas, and Cleveland, Ohio.
  • BP has stated that none of the job cuts would be in Alaska, where the company employs nearly 1,000 people.
  • The acquisition would strengthen BP's position in the global oil industry, increasing its total output and solidifying its presence in Alaska.
  • The combined companies would have more than 9 billion barrels of proven oil reserves and 30.5 trillion cubic feet of gas.
  • BP and Amoco hope to let shareholders vote on the merger this fall and close the deal by the end of the year.
  • The merger would allow the companies to better focus their oil exploration and take the initiative in the development of major new fields around the world.
  • Analysts believe that in today's oil industry, size translates to security and that the combined companies would have the top two international players (Exxon and Shell) looking over their shoulders.

Statistics

  • Combined sales of $108 billion in 1997
  • Profits of $6.8 billion in 1997
  • Approximately 6,000 jobs expected to be lost, mainly in Houston, Texas, and Cleveland, Ohio
  • Nearly 1,000 jobs in Alaska not expected to be cut
  • More than 9 billion barrels of proven oil reserves
  • 30.5 trillion cubic feet of gas

Sources

  • The Associated Press
  • British Petroleum
  • Amoco Corp.