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BP's problems fuel takeover talk

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BP's problems fuel takeover talk


As oil gushes into the sea from the Gulf of Mexico oil spill, BP continues to haemorrhage money and speculation grows on its future.

This week’s plunge in BP’s share price fuelled talk about a possible takeover bid of what was the largest company on the London Stock Exchange.

Oil industry analysts said rival so-called supermajors, such Exxon Mobil and Royal Dutch Shell, would certainly be looking at the numbers to see if a takeover could work, but were likely to be scared off by the liabilities from the spill.

Since the leak started, BP’s shares have lost more than a third of their value, cutting the value of the company by the equivalent of over 55 billion euros.

Stopping the spill, clean up and compensation could wipe out BP’s profits this year: last year it paid six billion euros in tax to the British government and eight billion euros in dividends to shareholders.

The cash-strapped newly-elected British government can ill afford to lose that amount of money in tax revenue.

One estimate by Credit Suisse was that the final cost – including possible criminal fines – could be as high as 17 billion euros.

Many of BP’s shareholders are large institutional investors such as pension funds and its losses could well ripple through the UK economy, impacting the pensions of Britons for years to come.

However, on Wednesday the slide in BP’s shares abated and they ended the session virtually unchanged, after a sharp 13.1 percent drop on Tuesday.

Traders said there was buying interest in the stock from some hedge funds and investors betting the stock will rebound from recent weakness.

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