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Merger talk boosts oil shares
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March 29, 1999: 12:34 p.m. ET
Chevron, others head higher as investors place bets on next target
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NEW YORK (CNNfn) - Oil stocks jumped Monday as merger talks between BP Amoco and Atlantic Richfield fueled betting on who might be the next takeover target in the struggling energy industry.
The rally boosted merger fever and gave a lift to the entire market, sending the Dow Jones industrial average up 153 points to 9,975, just shy of the 10,000 mark that Wall Street flirted with but couldn't hold less than two weeks ago.
Atlantic Richfield jumped 6-3/4 to 72-1/8 after BP Amoco said it was in talks about a "possible combination" with Arco, the nation's No. 7 oil company. A deal for Arco, which has a big California refining operation and a presence in Alaska, could be worth $77 a share, or up to $25 billion, reports said. BP Amoco itself was formed by the $48 billion merger of British Petroleum and Amoco just last year.
The boards of BP Amoco and Arco (ARC) were set to meet Tuesday and a merger announcement could come later this week, Reuters news agency reported. U.S. shares of BP Amoco (BPA) jumped 3-7/16 to 103-7/8.
A deal would be the latest in the industry as producers struggle with low prices that have hurt profits in the production and refining ends of the business.
Other oil stocks jumped on the news. Chevron (CHV), the nation's fourth-biggest producer which is often named as a possible merger partner, jumped 3 to 89-13/16. Texaco, the No. 3 oil company and another rumored merger player, added 3-1/2 to 59-1/16.
"Both those companies are probably going to have to make some moves," said industry analyst Bruce Lanni at CIBC Oppenheimer. "One of them is going to be an acquirer and one's going to be acquired."
"Companies need to get bigger so they can be competitive because there is no real pricing power," Charles White, a money manager who heads Avatar Associates, told CNNfn. He said a BP Amoco-Arco combination would lead to big cost savings since the companies have overlapping operations in Alaska.
Lanni said a BP Amoco-Arco merger could face tough scrutiny from U.S. regulators. "This is something that has never been tested before. Will the FTC allow BP to be the dominant producer on the (Alaskan) North Slope?" he said, referring to the Federal Trade Commission, which would review the deal, along with other agencies.
Other oil stocks that rose were oilfield services firms Halliburton (HAL), up 2-3/8 to 40-1/2, and Baker Hughes Inc. (BHI), which added 7/8 to 24-11/16. 
-- from staff and wire reports
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