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BP to buy Castrol for $4.7B
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March 14, 2000: 6:51 a.m. ET
British oil giant offers 75% premium for lubricants maker
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LONDON (CNNfn) - Oil giant BP Amoco was back on the acquisition hunt Tuesday, agreeing to acquire British oil and lubricants maker Burmah Castrol in a 3 billion-pound ($4.7 billion) cash deal.
BP is paying 1,675 pence for each Burmah share, a 75 percent premium over the target company's share price when the two announced they were in talks last week.
The deal is BP's first since its attempted purchase of Atlantic Richfield Co. (ARC: Research, Estimates) hit the rocks because of regulatory concerns. The Arco deal is still being reviewed by U.S. antitrust authorities.
Burmah (BMAH) stock surged on Tuesday's announcement, rising 26 percent to 1,581 pence, while BP (BPA) stock dipped 1.5 percent in London.
"Castrol is one of the great lubricants brands," BP chief executive John Browne said in a statement.
 "This is a good deal, BP had a hole in its lubricants portfolio and need a quality lubricant following the Mobil venture's breakup," said analyst Peter Hitchens at Williams de Broe, referring to the disentangling of BP's European refining and marketing joint venture with Mobil. European regulators demanded the break up of the agreement in return for nodding through the merger of Exxon and Mobil last year.
Hitchens described the cost of the deal as "a drop in the ocean" for BP, and pointed out that some of that will be recouped from expected annual cost savings of $260 million a year by 2003.
As part of its attempt to ease the Arco takeover BP is expected to sell a large part of the U.S. company's Alaskan activities, and is likely to recoup more than the 3 billion pounds it is spending on Burmah.
The latest deal also requires regulatory approval, as well as the consent of Burmah shareholders, although the firm's board has unanimously recommended the deal. 
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BP Amoco
Burmah Castrol
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