Tuesday, August 11, 1998 Published at 17:43 GMT 18:43 UK
Business: The Company File
BP and Amoco in oil mega-merger
Sir John Browne, Chief Executive of BP (left) with Larry Fuller, Chairman of Amoco and Peter Sutherland, Chairman of BP.
British Petroleum and US oil giant Amoco have announced plans for a $110bn (£67bn) merger that will create Britain's biggest company.
The new company, to be called BP Amoco, will have its headquarters in London.
The merger should be completed by the end of the year, although it needs the green light from shareholders.
Shares in BP surged 15% after the initial announcement but eased back to close at 795p, up 2.85%.
In New York, Amoco was trading at $46 3/4 at 1530 GMT, up from a Monday close of $40-7/8.
In the proposed deal, Amoco shareholders will get a 25% premium above BP's current market value.
Sir John said he hoped the merger will increase pre-tax profits of the two partners by "at least" two billion dollars by the end of 2000.
"International competition in the industry is already fierce and will grow more acute as new players emerge.
"In such a climate the best investment opportunities will go increasingly to companies that have the size and financial strength to take on those large-scale projects that offer a truly distinctive return."
The merger deal is a share swap whereby Amoco shareholders will be offered 3.97 BP shares for each share of Amoco common stock.
Most of the job cuts will be in the United States but the company said there would be some scaling back of its 17,000-strong UK workforce.
Between them, the two groups currently employ 99,450 staff, with BP - the bigger of the two - employing 56,450.
Further savings would be made from more focused exploration, streamlining business processes and extra buying power.
The group will have combined reserves of around 14.8bn barrels of oil and gas and daily production of three million barrels, with a prime presence in all main exploration areas.
It will also be a leading company in the areas of chemicals, petrochemicals and solar energy.
BP has 17,900 service stations around the world, while Amoco has 9,300 - all in the US.
Slump in oil prices
The price of a barrel of Brent crude oil slipped this morning to $11.8 - in real terms the lowest price in 25 years.
Chicago-based Amoco last month reported a fall of more than 50% in second quarter earnings.
Analysts said Amoco, the fourth largest US oil producer, was hurt by its lack of international refining and said a deal with an oil major was only a question of time.
Jeremy Batstone of NatWest stockbrokers said that BP had emerged as the dominant partner.
"It is billed as a merger because there are accounting reasons why that would be more appropriate, but broadly speaking BP is in the top seat," he said.
The Company File Contents