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Tue, Jul 13, 2010 - Page 10 News List

Prospect of takeover looms over BP

‘TAKING A LOOK’The Obama administration has reportedly told US oil company ExxonMobil that it would not stand in the way of a takeover bid for its British rival

THE GUARDIAN , LONDON

BP was at the center of fresh takeover speculation after weekend reports suggested US President Barack Obama’s administration has told ExxonMobil — the world’s largest oil firm — that it would not stand in the way of a takeover bid for the stricken British rival.

Before the Gulf of Mexico oil spill, BP was Britain’s biggest company with a stock market value of £121 billion (US$181.3 billion). Since then more than £50 billion has been wiped off its share value and a number of potential bidders are rumored to be circling to take advantage of its weakened state.

Oil industry sources were quoted as saying that ExxonMobil had been given a green light by the US government to “take a look” at BP. A merger would create a group with a stock market value of US$400 billion. Both firms refused to comment on the speculation.

BP’s chief executive, Tony Hayward, is well aware of the threat of a hostile bid and last week held a series of meetings with potential “friendly” investors including the Kuwait Investment Office. A big strategic investor would make it harder for the likes of ExxonMobil or China’s National Offshore Oil Corp (CNOOC, 中國海洋石油) to win control in a hostile takeover bid.

The Kuwaitis already have a 1.75 percent stake, but BP would like it to increase that to as much as 10 percent. Hayward is also understood to have met with another sovereign wealth fund, the Abu Dhabi Investment Authority (ADIA).

The cost of the spill to BP has ­already passed US$3.1 billion and the company has pledged some of its assets as security to the US government while it builds up a promised US$20 billion compensation fund. Analysts at Goldman Sachs estimate the final bill for the disaster caused by the explosion on the Deepwater Horizon rig, which killed 11 workers, could run to US$70 billion.

BP has already begun talks with rivals about selling off assets to help bolster its financial position. CNOOC is interested in buying the Argentinean gas businesses partly owned by BP. The UK oil firm’s joint Russian venture TNK-BP has also opened talks about buying assets outside Russia.

Yesterday, Apache Corp, the US’ largest independent oil group, was named as being in exclusive talks to buy investments worth US$12 billion from BP, including the stake in Alaska’s Prudhoe Bay, the largest oil field in North America.

“We’ve said we’re going to be divesting about US$10 billion over the next 12 months as a result of the spill, but we have no comment on specific deals,” a BP spokesman said.

BP is hoping to have some firm sales to announce before July 27 when it must release its first-half financial results and give a strategic update about the scale of liabilities faced in the US.

The oil spill — and BP’s handling of it — has made the firm public enemy No. 1 in the US, with Obama leading the call for blood. Such is the level of vitriol, that business groups claim US protectionism is on the rise and it is affecting other British firms. Foreign companies have already been restricted from access to US government bailout money and some important federal contracts.

This week the Washington-based Organization for International Investment will meet a handful of British business groups including the CBI and Business International to discuss the rise in anti-British rhetoric and how to counter it.

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