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Friday, September 24, 1999 Published at 11:18 GMT 12:18 UK

Business: The Company File

The UK's biggest takeovers

BP Amoco was the UK's biggest ever corporate merger

The pace of takeovers has been accelerating in the past year in the UK.

Natwest under siege
  • Banking on size
  • The UKs biggest takeovers
  • Q&A: Natwest takeover bid
  • Timetable of a takeover
  • Bank of Scotland: a history
  • Merger frenzy has particularly hit the financial services sector, with banks buying up each other, insurance companies, and investment firms.

    But the largest takeovers have occurred in the sectors which are the favourites of the stock market - the telecoms sector and pharmaceuticals.

    [ image:  ]
    And cross-border merger activity, particularly with UK companies taking over their US rivals, has led to some of the biggest corporate takeovers.

    The booming stock market, with its high share valuations, has made it easier for companies to take each other over using their own stock.

    It also means that the largest mergers in absolute terms have occurred very recently - given the huge recent increases in the market capitalisation of many of the UK's biggest companies.

    BP Amoco

    But the biggest ever corporate deal involving a UK company was last year's merger between oil company BP with its smaller American rival Amoco.

    The deal transformed BP into one of three biggest oil companies in the world, overtaking Anglo-Dutch rival Shell to challenge Exxon - which later responded with a huge merger of its own, to Mobil.

    The mergers in the oil sector, unlike some areas, were driven by the collapse of the oil price, which meant that only the biggest companies could make the cost savings needed to meet the huge costs of exploration.

    Pharmaceuticals and telecoms

    This year the biggest UK deals have involved two very hot sectors - mobile phones and drugs.

    The UK's biggest mobile phone company, Vodafone, bought one of its US rivals, Airtouch, for £42bn.

    Vodafone then merged Airtouch with another US mobile phone network owned by Bell Atlantic to form a partly-owned subsidiary worth $70bn.

    Vodafone is now the second biggest company on the London stock market, and reportedly looking for further mergers or acquisitions.

    Also this year, the UK pharmaceutical company Zeneca, a spin-off of ICI, merged with Swedish firm Astra to form one of Europe's biggest drug firms.

    In part, it was trying to compete with GlaxoWellcome, the UK's largest pharmaceutical firm, which was itself the product of the largest merger of its time. The other big UK pharmaceutical company, SmithKline Beecham, is also a transnational merger. High development costs of new drugs have driven many pharmaceutical mergers.

    Financial services

    But the sector that many people believe will increasingly dominate the takeover stakes is financial services.

    There have already been some very big deals in this sector - with NatWest's earlier plan to merge with insurer Legal & General among the biggest.

    Lloyds, which is the largest UK bank, secured its position with some well-timed takeovers, first of TSB in 1995, then of building society Cheltenham and Gloucester, and finally this year by buying insurance company Scottish Widows for £7bn.

    Prudential has also been in the merger market, acquiring unit trust investment company M&G.

    A number of mergers did not take place. Alliance and Leicester's £11bn merger with the Bank of Ireland collapsed after disagreement over who would run the company.

    And Barclays, the weakest UK clearing bank, has reportedly been looking for a merger partner.

    HSBC, which owns the Midland, also has found its plans to move into the USA up in the air. Its £6bn bid for Republic Bank in New York may have to be withdrawn after a billion dollar financial scandal.

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