Company of the week

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The Independent Online
British Petroleum agreed to acquire Amoco for about $53.9bn in the biggest oil industry acquisition ever. The takeover comes as the industry struggles with some of the lowest prices for crude oil in 12 years, and analysts said other combinations of big oil companies are on the way.

Investors applauded the BP/Amoco transaction, bidding up shares of both companies on a day when stock markets around the world sank. BP shares rose nearly 10 per cent on the week. Shareholders of Chicago-based Amoco will get 3.97 of BP's London-traded shares, in the form of American depositary receipts, for each Amoco share. BP expects to complete the buyout by the end of the year.

Cost-cutting after the merger will add $2bn a year to annual earnings by 2000. Combined, the companies made $5.2bn in 1997. BP said 6,000 jobs will be "affected" worldwide, including 1,000 firings in Cleveland, where BP has its US refining and marketing operations. The companies employ 100,000 people worldwide.

The purchase will strengthen BP in petrochemicals, US refining and North American natural gas, making the company less susceptible to oil price swings. Amoco, though it has some of the largest natural gas reserves in North America, has been frustrated in its attempts to find oil and needs BP's international reserves to meet future demand.

Amoco "has lacked focus", said Vince Francom, an analyst with Safeco Asset Management. "In 1995, they mention how they're going to concentrate on refining in Eastern Europe. In 1996, they said we're selling all of that. They seem to be all over the place."

Regulators in both the US and UK will give the acquisition close scrutiny, antitrust lawyers said. "There will be pipeline issues, refinery issues and retail store issues," said Steve Newborn, a Washington antitrust lawyer.