BLOG: Worry over BP takeover groundless?

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27/04/2015
The government met with BP to discuss its opposition to the takeover of the oil giant, the Financial Times reported over the weekend.

David Cameron’s administration is keen for BP to remain a British company, and is understood to be sceptical about any takeover – whether from an overseas or national competitor; a government spokesperson states “it is in our national interest to have British companies competing and succeeding at home and abroad.”

Earlier this month, Royal Dutch Shell acquired competitor BG Group for £47bn in one of the largest corporate transactions ever; the move caused speculation among analysts of further consolidation in the oil and gas sector to come. BP, perceived as weak by some due to the Gulf of Mexico oil spill five years ago, is speculated to be a prime target for cash-rich overseas majors (such as ExxonMobil).

While the government wants the UK to maintain at least two major global oil companies, at present there is little that can be done officially to prevent a takeover; five years ago, when BP shares fell dramatically following the Gulf of Mexico spill, the government investigated the issue, but few possible countermeasures were forthcoming.

Nonetheless, the investigation did suggest that the best way of disincentivising prospective buyers (whether national or international) was for the Secretary of State for Energy and Climate Change to retain exploration licence approval; in the event of a takeover, the Secretary of State could threaten to veto applications made by a future owner.

The government, however, may be overestimating BP’s attractions; problems within the company itself may be more than sufficient to put off a prospective bidder: “Ongoing liabilities, together with a heavy exposure to sanctions-hit Russia, are major deterrents for any potential hostile bid for the company,” believes Dmitry Zhdannikov of Reuters.

BP have repeatedly declined to comment on the story; but on Sunday chief executive Bob Dudley informed CNBC that BP hadn’t been approached by any purchasers. The prospect of a BP sale could well be a red herring.

 

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