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FTC staff opposes BP-Arco
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December 1, 1999: 1:34 p.m. ET
Advisers seek deal rejection, citing Calif. oil prices; more concessions loom
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NEW YORK (CNNfn) - The staff of the Federal Trade Commission is recommending that the panel block BP Amoco Plc's $27 billion buyout of the U.S. oil company Atlantic Richfield Co., sources confirmed to CNNfn Wednesday.
Concern that the merger would result in higher gasoline prices in California, which already has some of the highest gas prices in the nation, is at the root of the staff’s thinking, the sources said.
The formal staff recommendation to the full, five-member FTC said that the commissioners should vote to reject the deal and move to stop it, sources told CNNfn. The FTC panel hasn’t set a meeting yet. A vote to reject the deal could face a court challenge by the companies.
The FTC staff believes the deal is "difficult to impossible" to fix, one of the sources said. But while any deal is theoretically "fixable," one of the sources said, at some point those fixes make the deal no longer worthwhile.
Jack Aydin, an oil analyst with McDonald Investments, said the FTC is just trying to milk more concessions out of the companies, who he believes are likely to win if they take it to court.
"I would say that this is posturing” on the FTC’s part, he said. "There’s not enough there to block it. At the end of the day, if it goes to court, BP Amoco will win.”
The intensified scrutiny and leanings against the proposed deal have been known for some time, but the companies had been working with U.S. and state officials to meet their concerns.
The New York Times, citing two people, said the commission is likely to demand significant divestitures to ensure crude oil competition on the West Coast.
The big problem for the FTC staff is that BP Amoco would increase its already substantial holdings in Alaska, which supplies much of the oil for the West Coast.
BP and Atlantic Richfield, known as Arco, would be the largest oil producer in Alaska, which provides the bulk of California’s oil. Their deal caused problems for Alaskan authorities, although these appear to have been overcome.
Shares of Los Angeles-based Atlantic Richfield (ARC) fell 5-3/16 to 90-3/4, while American Depositary Receipts of BP Amoco (BPA) slipped ¼ to 60-11/16.
FTC procedure allows the companies to brief the commission and offer more concessions. A BP spokesman said that he thought a palatable deal could still be worked out.
The hurdles to the BP-Arco deal arose just as rivals Exxon and Mobil received permission to close their $81 billion deal, the world's largest industrial merger.
BP Amoco put a brave face on the emergence of a huge rival, claiming that regulatory OK for ExxonMobil is a good sign for its own proposed deal.
"We welcome the FTC approval for three reasons," a BP spokesman said. "Because it allows us now to have the full focus of FTC attention on the Arco transaction, it allows us to finalize the terms with Mobil to buy out their share of the joint venture in Europe, and because the requirement for Exxon-Mobil to sell the refinery in California means less concentration in that state, and therefore strengthens our case in the Western states."
The spokesman refused to comment directly on the Times report, although he did concede that meeting the end-of-year deadline to complete the deal would be more difficult now.
But Linda Dozier, a spokeswoman for Atlantic Richfield, said "This is the most ludicrous of challenges... [and] shows a misunderstanding of the West Coast marketplace. 
-- from staff and wire reports
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BP Amoco
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