Amoco, BP merger OK'd
Under FTC settlement, oil giants have agreed to shed gas stations and terminals
NEW YORK (CNNfn) - The Federal Trade Commission on Wednesday conditionally paved the way for British Petroleum Co. and Amoco Corp to join forces in a $49 billion merger that would spawn the world's third-largest oil company, with daily production of about 3 million barrels.
In a statement Wednesday, the FTC said the oil giants had agreed to a regulatory settlement under which the companies will spin off 134 gasoline stations and nine petroleum terminals, and give 1,600 independent gas stations the option of switching brands.
In response, BP and Amoco said they intended to close the deal shortly after 9 p.m. London time (4 p.m. EST) on Dec. 31. At that time, Amoco's stock will no longer be listed on the Standard & Poor's 500 and the shares of the new company, BP Amoco Plc, will be listed on the London Stock Exchange.
American depositary receipts of BP Amoco will also be listed on the New York, Pacific, Toronto and Chicago stock exchanges.
In a statement issued after the FTC voted 4-0 to approve the merger, the agency's chairman, Robert Pitofsky, expressed confidence that the divestitures would enable the newly created companies to satisfy any outstanding antitrust concerns.
"Although the merger of BP and Amoco involves companies of enormous size, and there is a significant trend toward concentration in the petroleum industry, the operations of these two companies rarely overlap in a way that threatens competition," Pitofsky said.
A scramble to consolidate
The statement underscored the intensified scrutiny that regulators are bringing to bear on potential merger partners as the oil industry scrambles to consolidate in the face of dwindling crude oil prices and weaker customer demand.
The new BP/Amoco (AN) entity would rank third in size among the world's oil monoliths, behind the proposed Exxon Corp. (XON)-Mobil Corp. (MOB) giant and Royal Dutch/Shell Group.
But the combination will offer up some world-beating credentials in its own right: the marriage between BP-Amoco will form an energy conglomerate with a market capitalization of $140 billion.
The new company, to be called BP Amoco Plc, will also be Britain's largest corporation. The combined unit will boast oil and gas equivalent reserves of nearly 15 billion barrels. The companies have set a tentative target of at least $2 billion in annual pre-tax earnings by the end of 2000.
In its examination of the proposed BP-Amoco merger, agreed by both companies on Aug. 11, the FTC found that the companies' operations do not overlap in major areas such as oil and natural gas production, or in petrochemical manufacturing.
But in a complaint listing objections to the merger, the agency charged that the combined company could lessen competition in the wholesale sale of gasoline in 30 metropolitan areas in the eastern U.S.
The FTC said competition could also be affected in nine geographic markets containing terminals where gas and light petroleum products are shipped before being routed to stations.
Petroleum terminals are facilities used to temporarily store gasoline and other products received from a pipeline. The terminals provide delivery as well from their storage tanks into tank trucks for shipment to gas stations and other customers.
Agreement to shed 150 retail sites
Under the FTC's proposed settlement, BP and Amoco said Wednesday they had agreed to divest 150 retail sites in eight markets where their interests are seen as overlapping.
Amoco would divest all of its retail gas stations in Tallahassee, Fla., and Pittsburgh, Pa. BP would sell its stations in Charleston, South Carolina; Charlotte, North Carolina; Columbia, South Carolina; Jackson and Memphis, Tenn.; and Savannah, Ga., the FTC said.
The divestitures must be completed within six months.
The companies have also apparently agreed to give wholesale customers in all 30 markets - including those in which neither BP nor Amoco owns gas stations - the option of canceling their franchise and supply agreements with BP and Amoco.
The FTC said terminals in nine markets must be sold to Williams Energy Ventures Inc., a unit of William Cos., or to another purchaser approved by the commission. Inc. BP and Amoco confirmed that they will sell the terminals to Williams.
The divestiture must take place within 10 days of the merger's consummation, or 30 days after a consent agreement is signed - whichever is later.
BP, a diversified energy products company with headquarters in London, distributes and markets its gasoline under the BP brand name at terminals and gas stations across a broad territory, including areas of the southwest and Midwestern U.S.
The Chicago-based Amoco, an integrated petroleum and chemical products company, refines and ships petroleum products such as crude oil, gasoline, jet fuel and diesel fuel.
Shares of Amoco were off 1-7/16 at 56-9/16 Wednesday on the New York Stock Exchange. American depositary receipts of BP were down 3-15/16 at 86.