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Standard Oil Board OKs BP’s Higher Offer

April 28, 1987

NEW YORK (AP) _ British Petroleum Co. PLC and Standard Oil Co. said Tuesday they had agreed upon BP’s sweetened offer to buy the 45 percent of Standard Oil that it does not already own.

The cash and securities deal, worth roughly between $7.8 billion and $8 billion, also served as the basis of an out-of-court settlement of class action suits opposing BP’s acquisition of Standard, the companies said.

Industry analysts hailed the deal, saying it would facilitate smoother operation of the combined company, while giving BP a broader U.S. market base and increased stocks of valuable petroleum reserves.

Wall Street also reacted positively, pushing Standard Oil’s stock up $1.25 to $73.37 1/2 per share in New York Stock Exchange trading. BP’s stock rose $1.75 to $61 per share.

Standard Oil, which is heavily involved in Alaskan oil production, will retain its name and stay in Cleveland as headquarters of BP’s North American operations while enjoying the benefits of BP’s greater size and financial muscle.

Under the new plan, the London-based oil giant will pay $71.50 in cash for each share of Standard Oil common stock, $1.50 more it originally offered on March 26.

In addition, Standard Oil shareholders will be permitted to keep a recently announced 70 cent per share dividend, which BP originally had said was to be subtracted from its bid.

Shareholders will also be eligible to receive a warrant for one share of BP stock for every five of their Standard Oil shares. Analysts said the market was estimating the value of the warrants, which do not yet trade publicly, at between $6.50 to $10 apiece.

″It’s good for BP because it strengthens its long-term crude oil position, plus it’s much easierto run the company when you own it all,″ said Sanford Margoshes, an analyst at the Shearson Lehman Brothers Inc. securities firm.

Eugene Nowak, who heads the energy group at Dean Witter Reynolds Inc., said, like many analysts, that Tuesday’s announcement was no surprise.

BP’s interest in Cleveland-based Standard Oil dates back to the late 1960s. Having acquired what turned out to be more than half of the Alaskan North Slope, BP lacked a strong U.S. refining and marketing capcity - which Standard Oil had.

By 1970 it began acquiring a position in Standard Oil, which grew to a majority interest by 1978 and to 55 percent in 1984. As part of the deal, BP exchanged its Alaska interests for shares in the U.S. company. Analysts said it was no secret that BP eventually wanted full control of Standard.

Nowak said BP’s decision to move now was made ″largely on the basis that BP thought the price of oil had stabilized.″

″It wants to capture (Standard’s) cash flow and resolve the issue sooner rather than later,″ he added.

In a joint statement Monday, both companies said Standard Oil’s board and its special committee of outside directors that monitored BP’s relationship with its U.S. subsidiary had determined ″the transaction as a whole is acceptable.″

″The Special Commitee and the board also advised the public shareholders to make their own individual decisions, based on all available information, whether to tender all or part of their shares in the offer,″ it said.

In addition, the committee stated BP had informed an Ohio court of its tentative settlement with the plaintiffs of consolidated class action suits filed to halt the takeover.

In Cleveland, Cuyahoga County Common Pleas Judge Thomas J. Pokorny said the tentative settlement of the class action suits against BP would be presented at a hearing Wednesday. Standard Oil will have 30 days to notify shareholders of the proposal, which could be approved by early or mid-June, he added.

The proposed settlement, which the court must approve, provides that BP will pay the $71.50 per share price to plaintiffs in the suits, and that plaintiffs will receive the warrants only on the condition that they do not request exclusion from the class or exercise dissenters’ rights.

British Petroleum said it would issue warrants to buy BP ordinary shares in the form of American depositary receipts for $80 apiece at any time through Dec. 31, 1992.

Shareholders who otherwise would receive a fractional warrant would instead receive a cash payment from BP.

The new tender offer, which remains subject to approval by BP and regulators, will expire on May 11. If approval is delayed beyond June 30, the expiration date of the warrents would be extended proportionally, BP said.

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