BP Amoco, the UK's largest company, is close to announcing the take-over of Atlantic Richfield of the US in an all-stock deal worth about $25 billion.
An announcement by the companies is expected later this week after the boards of BP Amoco and Arco, the seventh-largest US oil group, have met to vote on the deal, people close to the transaction said.
If successfully completed, the deal would be the latest example of consolidation in the oil industry and be the second time in less than a year that the former British Petroleum has unveiled a major acquisition. Sir John Browne, BP Amoco's chief executive, triggered the most recent wave of consolidation in the global oil industry last August when he announced the take-over of Amoco of Chicago, effective from the end of last year. It prompted Exxon and Mobil to merge.
BP yesterday declined to comment and Arco, based in Los Angeles, could not be reached for comment. While talks between the two companies have been going on for several weeks, people close to the transaction warned that as with all sensitive take-over deals the prospective transaction could still hit problems even at this late stage.
An important factor will be how investors in BP Amoco and Arco respond today to the news that the two companies are set to merge. While it seems unlikely that any other oil company will make a counter offer for Arco, a big surge in Arco's stock price could throw the deal into doubt.
Arco's stock closed on Friday at $65, giving it a market capitalisation of $21 bn. People close to the talks said yesterday that Arco is looking for a premium of about 19 per cent to 20 per cent, implying a proposed take-over stock price of approximately $77 a share and valuing Arco at about $25 billion. BP Amoco's stock price closed on Friday at 10.37.
