BP cuts 2,000 jobs in $26.8bn takeover of Arco

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The Independent Online
BP AMOCO, the British oil giant, is to shed 2,000 jobs worldwide and dispose of $3bn worth of assets following yesterday's $26.8bn (pounds 16.5bn) takeover of Atlantic Richfield of the US.

The takeover, BP Amoco's second major deal in eight months, will yield cost savings of $1bn (pounds 600m). Around 200 of the job losses will fall at Arco's UK headquarters in Guildford, Surrey. But BP Amoco will also be forced to write-off $20bn in goodwill and pay stamp duty of $400m on the deal following rule changes rushed in by the Inland Revenue after the $55bn takeover of Amoco last year.

The takeover will make BP Amoco the biggest oil producer in the world outside Opec, and the second biggest oil major in the world by value after Exxon-Mobil with a market capitalisation of $190bn (pounds 117bn). The group will also be the largest oil producer and refiner in the US.

Sir John Browne, the chief executive, said: "Scale carries some advantages but it also carries disadvantages and size it not the motivating factor behind this move. We are aware that we will have to counter some of the negative elements that go with size."

The $3bn of asset sales have already started with the sale yesterday of 137 petrol retail outlets in the US to Tosco, the petrol retailer. But the biggest disposals will fall in Alaska, where competition authorities will demand the combined group sells over a third of its exploration acreage, leaving it with 500,000 acres. Pipelines and terminals are also likely to be sold.

Mr Browne said: "We want to make it very clear that this is a pro-competitive deal - it is not an anticompetitive move. In our downstream operations there is no overlap between the companies. There isn't even one petrol station that overlaps," he said.

The entire board of Arco will resign and will not be employed by BP Amoco. Mike Bowlin, chairman and the only executive member of the board, is expected to receive a multi-million dollar payoff in addition to the $4m reward package in place.

Mr Browne said he was approached by Mr Bowlin in early January. "They asked if we would like to look at effectively buying their company," he said.

In September, Mr Bowlin had warned all of his staff they would have to tighten their belts to preserve their independence because of the depressed oil price. He set in train $500m of cost cuts.

The all-share takeover, which is expected to be earnings enhancing as long as the oil price stays over $11 a barrel, offers 0.82 BP Amoco ADRs for every Arco share. The new group will keep the BP Amoco name. Mr Browne said the company hoped to complete the merger by the end of the year. Integration between BP and Amoco wasnearing completion, he said.

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