BP prepares for potential takeover offers
OIL giant BP, which was said to be readying defenses for potential takeover offers, has a little-known ace in the hole: a disclaimer in its Macondo spill settlement that could tack $12.6 billion (R177bn) onto the price tag.
A potential buyer might be forced to accelerate the payment of as much as two-thirds of the $18.7bn in penalties the company agreed to pay the US and several states, according to company filings.
An option that gives the federal government and some states the ability to demand faster payment in a takeover effectively hands them a veto over any deal. Together with the company’s exposure to Russia amid sanctions and the worst oil crash in decades, it amounted to a powerful deterrent to suitors, said William Arnold, a former banker and executive at Royal Dutch Shell.
“This would be an important factor for those looking at possible opportunities” in many of the deal-focused war rooms that form in oil and gas down-cycles, said Arnold. “To have to make such substantial upfront payments at a time when cash flows are down so much would make an attempt a lot more difficult.”
Geoff Morrell, a spokesman for BP, declined to comment.
The structure of its settlement of government claims tied to the 2010 spill, which poured more than 3 million barrels of crude into the Gulf of Mexico and caused the deaths of 11 workers, allows the federal government or states to demand more immediate payment “in the event of a change of control or insolvency of BP”, BP disclosed in July.
Such demands on the part of the Justice Department in large-scale settlements were not unusual, as they protected the ability of the government and plaintiffs to be paid even in uncertain circumstances, said Brandon Barnes, an energy litigation analyst at Bloomberg Intelligence in Washington.
The accelerator clause tucked into BP’s settlement of government pollution and spilldamage claims created a “disincentive” for anyone looking to take over the British oil major, according to David Berg, a Houston-based lawyer who had negotiated many settlements between polluters and municipalities. – Bloomberg