BP-Amoco finish merger after FTC approval

The U.S. Federal Trade Commission has allowed British Petroleum Co. plc and Amoco Corp. to merge if they sell 134 gasoline stations and nine terminals and allow more than 1,600 independent gasoline stations to switch suppliers.

On Dec. 31, BP and Amoco completed the $53 billion merger transaction, announced Aug. 11 (OGJ, Aug. 17, 1998, p. 34).

Stocks buoyed

The companies closed the transaction shortly after 9:00 p.m. London time on Dec. 31, when the shares of the merged group, BP Amoco plc, were listed on the London Stock Exchange.

American Depository Shares of BP Amoco were subsequently listed on the New York Stock Exchange and the Pacific, Chicago, and Toronto stock exchanges to enable trading effective the start of business on Jan. 4.

Almost immediately, the share price for the new company began to rise, against the general downward trend in petroleum stocks. London's Financial Times (FT) reported that, on Jan. 4, BP Amoco shares rose 21.5 pence (35.5¢) during the day's trading to close at £9.25/share ($15.25/share).

Some fund managers and dealers complained that the opening share price for BP Amoco stock was set too low, causing investors to lose money.

Nevertheless, on Jan. 4, FT reported that 187 million BP shares changed hands, making it the most traded stock on the markets that day.

With a market capitalization of more than $140 billion, BP Amoco will be Britain's biggest company and one of the world's top three oil majors.

Target met

"We set ourselves the demanding target of closure by yearend," BP CEO John Browne and Amoco Chairman Larry Fuller said in a joint statement. "We are delighted that we will achieve that and, in the process, set a new record of 100 working days for the completion of such a large and complex transaction."

FTC Chairman Robert Pitofsky said, "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.

"Where they do overlap, mainly in wholesale and retail sale of gasoline in local markets in this country, the commission, with the cooperation of the companies, has achieved substantial divestitures and other relief that makes it likely that consumers will enjoy the benefits of competition."

The commission determined BP's and Amoco's operations do not overlap significantly in oil and gas production or petrochemical manufacturing.

But it had concerns about the wholesale sale of gasoline in 30 cities or metropolitan areas in the eastern U.S. and the terminaling of gasoline and other light products in nine markets. FTC said entry into the wholesale gasoline market is difficult.

Gasoline stations

The commission required Amoco to sell its service stations in Tallahassee, Fla., and Pittsburgh, Pa. BP would divest its stations in Charleston and Columbia, S.C.; Charlotte, N.C.; Jackson and Memphis, Tenn.; and Savannah, Ga. The sales must be completed by June 29.

Also, in all 30 markets, including those where neither BP nor Amoco owns service stations, the settlement would require them to give their wholesale customers (both jobbers and open dealers) the option of canceling their franchise and supply agreements with Amoco and BP, freeing them to switch their stations to other brands. More than 1,600 service stations could be affected, FTC said.

To create an incentive for these dealers to change brands, the proposed settlement order would provide that wholesale customers that take advantage of this provision would be released from all related debts, loans, and other responsibilities (other than for fuels actually delivered and some specifically identified loans), if they agree to switch to another brand that has less than 20% of the market.

The 30 markets are: Tallahassee, Fla.; Albany, Athens, Columbus, and Savannah, Ga.; Birmingham, Dothan, Florence, and Mobile, Ala.; Hattiesburg and Meridian, Miss.; Clarksville, Jackson, and Memphis, Tenn.; Charleston, Columbia, Myrtle Beach, and Sumter, S.C.; Charlotte, Fayetteville, Goldsboro, Hickory, Raleigh, and Rocky Mount, N.C.; Charlottesville, Va.; Cumberland, Md.; Pittsburgh, Pa.; and Toledo, Cleveland, and Youngstown, Ohio.

The proposed order would require that, unless retail gasoline sellers representing a specified volume of sales in Toledo and Youngstown, Ohio, agree to switch to other brands, the companies must divest retail gasoline stations with an equivalent volume of sales to an acquirer acceptable to FTC.

Dealers nervous

The sale-of-stations clause left some retail station owners nervous. Stanley M. Schuer, executive director of the Gasoline & Automotive Service Dealers Association, New York, said, "Where you have a BP and an Amoco station across the street from one another, dealers will be very concerned about whether or not one of them is going to be forced out of business."

An Amoco official said that, on Dec. 30, the company began sending letters to its dealers and distributors informing them of the merger, the FTC's conditions of approval, and what the likely impact would be on them.

"We couldn't do anything until we had the (FTC) consent decree," said the official. "Amoco and BP have 6 months to sell the affected stations, which could then remain open under another company's brand."

The official said it was too soon to say if some would be forced to shut down altogether: "We regret that we will need to part ways with a number of loyal and longtime customers."

Terminals

The commission said that, in nine metropolitan areas, the merger would concentrate the terminaling of gasoline and other light petroleum products and that entry into the market would be difficult.

The proposed settlement would require BP and Amoco to sell the nine terminals to Williams Energy Ventures Inc., a Williams subsidiary, or to another buyer approved by FTC. The divestiture must occur within 10 days of the BP-Amoco merger, or 30 days after the consent agreement is signed, whichever is later.

The nine areas affected by this part of the settlement are: Cleveland, Ohio; Chattanooga and Knoxville, Tenn.; Jacksonville, Fla.; Meridian, Miss.; Mobile and Montgomery, Ala.; and North Augusta and Spartanburg, S.C.

FTC vote

FTC voted 4-0 to accept the proposed consent agreement. Commissioner Orson Swindle dissented on the alleged antitrust violation concerning wholesale markets for gasoline and the corresponding relief in the proposed order.

The commission reconsidered the BP-Amoco deal after Exxon Corp. proposed Dec. 1 to buy Mobil (see Watching Government, p. 31).

Before the merger, Amoco was the fifth-largest oil company in the U.S., with roughly 9,300 gasoline stations. BP, previously the world's third-largest oil company, sells its products through a network of about 17,900 stations.