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BP’s fall presents Shell with a once-in-a-lifetime opportunity

Financial Times: Talk of takeover swirls around BP

By Lina Saigol and Miles Johnson in London and Ed Crooks in Houston

Published: June 2 2010 23:49 | Last updated: June 2 2010 23:49

When a whale is wounded, it does not take long for the sharks to circle. With BP floundering in the Gulf of Mexico, the market has been abuzz with talk of a takeover of the British oil major.

The substantial erosion of BP’s market value – its shares have fallen 34 per cent since the Deepwater Horizon rig exploded on April 20 – means the company looks affordable to rivals for the first time in decades.

The huge and indeterminate costs for clean-up, damages, fines and compensation – analysts’ forecasts of the cash cost to BP have so far typically ranged up to about $20bn – could spiral into tens of billions of dollars.

In spite of that, traders believe BP’s fall in market value presents Shell with a once-in-a-lifetime opportunity.


Approaches that came to nothing

By Ed Crooks and Miles Johnson

Published: June 3 2010 03:00 | Last updated: June 3 2010 03:00

BP and Royal Dutch Shell have a long history of courtship, with mergers proposed but never consummated.

Lord Browne, BP’s chief executive until 2007, tells in his memoirs of two occasions when the companies were nearly brought together to create the world’s largest private sector oil group.

The first came in 1995, when Shell’s chairman approached Lord Browne, then newly appointed, to suggest a deal. BP’s share price was at a low ebb, and the company seemed vulnerable.

As Lord Browne puts it: “For Shell, it would have been a cheap way of getting a presence in E&P [exploration and production] areas missing from their map.” His tactic was to stall and in the end the approach petered out.

Then, in 2004, the boot was on the other foot. BP was riding high and Shell was laid low by the reserves misreporting scandal that was revealed in January of that year.

Copyright The Financial Times Limited 2010.

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