Government washes its hands of BP takeover

BP will not be able to rely on support from the British Government if it is the target of a takeover bid, it emerged yesterday, as rivals considered whether to take a tilt at the embattled oil company. A spokesman for the Department for Business, Innovation and Skills (DBIS) declined to comment on reports that the US oil major Exxon, has been in contact with the Obama administration over a possible bid for its beleaguered FTSE 100-listed rival. But a spokeswoman for the DBIS said: "Takeovers and mergers are commercial matters for companies."

BP has been reeling ever since the Gulf of Mexico oil spill in April, with its stock-market value halving as a result. The shares closed last week at 364.75p, although that is still up by about a fifth from the low point reached when the company's initial efforts to plug the leak had failed.

BP's chief executive, Tony Hayward, has been in the Middle East to attempt to lure investors amid suggestions that a rival could use the company's current weakness to launch a takeover bid. There has also been interest in the shares from Libya.

While the Government's statement about merger policy suggests that Britain would allow a deal to pass, such a move would create huge controversy given the number of American takeovers of British companies thought to be in prospect over the coming months. The Conservative Party has traditionally adopted a hands-off approach when it comes to foreign deals. The coalition Government also stopped short of intervening on BP's behalf after it was the subject of bitter criticism from President Barack Obama, whose handling of the disaster has been sharply criticised in the US.

However, a bid from an American company would still be likely to put pressure on Vince Cable, the Secretary of State for Business and a former chief economist at BP's rival, Royal Dutch Shell.

Kraft's hostile takeover of Cadbury sparked anger because the US food group was seen as having taken advantage of Britain's laissez-faire approach when it comes to foreign takeovers, and because of the way that UK takeover rules work. As Kraft strung out its bid, Cadbury's share register became filled with short-term speculators who were keen to net short-term profits by giving the green light to a takeover.

As the oil giant grapples with the financial effects of the spill, talks about an £8bn asset sell-off to help meet the costs of tackling the disaster in the Gulf are reportedly under way. Assets that could be disposed of include BP's substantial stake in the giant Prudhoe Bay oilfield in Alaska. A sell-off of assets worth about $10bn (£6.6bn) would help to give some assurance to the markets about the company's ability to meet the escalating costs of cleaning up after the leak.

However, the sale of a stake in Prudhoe Bay – one of BP's prize assets which produces 390,000 barrels of oil a day – would be a bitter pill for the company to have to swallow.

Other sell-offs being considered by BP are its stake in the Argentinian oil producer Pan-American Energy, as well as its operations in Venezuela, Colombia and Vietnam.