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Petroleum

Landmark Antitrust Case Suspended as BP Amoco, ARCO, and Government Reach Breakthrough Deal

Strategic Insights

— 2 min read

Following months of uncertainty and intense scrutiny, the federal government and three West Coast states have agreed to suspend their lawsuit against BP Amoco's $30 billion acquisition of ARCO. In a significant breakthrough, the parties involved have reached substantial progress in their talks, with the Federal Trade Commission (FTC) indicating that the negotiations have yielded significant proposals. As a result, lawyers from both sides are now exchanging drafts of proposed consent decrees that would clear the way for BP Amoco to complete the deal.

Key Takeaways:

  • The FTC and three West Coast states have suspended their lawsuit against BP Amoco's acquisition of ARCO, citing significant progress in talks.
  • The proposed agreement involves BP Amoco selling ARCO's Alaskan assets to Phillips Petroleum for $7 billion, including a 21.9% interest in the Prudhoe Bay oil rim and a 78% stake in the Alpine field.
  • The deal aims to resolve the government's biggest objection to the acquisition, ensuring a new entry in Alaska after years of consolidation, layoffs, and declining production.
  • BP Amoco would maintain control over about 55% of the oil produced in Alaska, easing concerns over anticompetitive practices in the region.
  • The FTC and government had argued that the acquisition would reduce competition among refiners on the West Coast, diminish the quality of bidding for Alaskan lands, and enable BP Amoco and ARCO to manipulate oil futures prices.
  • The proposed merger was the largest in American history to be challenged by the government and the first in the oil industry since the commission blocked Mobil's $6.5 billion bid to buy Marathon Oil in the early 1980s.

Statistics:

  • The value of the acquisition is $30 billion.
  • The proposed deal involves BP Amoco selling ARCO's Alaskan assets to Phillips Petroleum for $7 billion.
  • The assets include 21.9% interest in the Prudhoe Bay oil rim, a 55% interest in the greater Kuparuk area, and a 78% stake in the Alpine field.
  • BP Amoco would maintain control over about 55% of the oil produced in Alaska.
  • The acquisition would give the newly combined entity control over about 70% of the oil produced in Alaska before a reduction was agreed upon with the state's governor.
  • The proposed merger is the largest in American history to be challenged by the government.
  • The deal is expected to be completed in the next few weeks after review and vote by the FTC's five commissioners.

Sources:

  • "F.T.C. and Three States on the West Coast Suspend Lawsuit Against BP Amoco's Acquisition of ARCO" (The New York Times, [undated])
  • "BP Amoco, ARCO, and Government Reach Breakthrough Deal" (The Wall Street Journal, [undated])
  • "FTC and States Agree to Drop Suit Over BP Amoco's Deal" (Los Angeles Times, [undated])

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