Tuesday, August 11, 1998 Published at 16:33 GMT 17:33 UK
Business: The Company File
BP and Amoco in oil mega-merger
BP shares soared following the announcement
British Petroleum and US oil giant Amoco have announced plans for a $110bn (£67bn) merger that will create Britain's biggest company.
This will place it in the top three of international oil producers.
The new group confirmed that it would cut 6,000 jobs worldwide as a result of the merger.
Shares prices in BP soared after the announcement as the market welcomed news of the deal.
Shares in BP surged 15% after the news broke - helping to revive an ailing FTSE 100 index.
The merged company will be held 60% by BP shareholders with the remaining 40% held by Amoco shareholders.
Click here to find out more about the two companies' history
In the proposed deal, Amoco shareholders will get a 25% premium above BP's current market value.
Sir John said he hoped the merger will increase pre-tax profits of the two partners by "at least" two billion dollars by the end of 2000.
"In such a climate the best investment opportunities will go increasingly to companies that have the size and financial strength to take on those large-scale projects that offer a truly distinctive return."
Amoco's head office will become the headquarters for the company's North American operations.
The company confirmed cost reductions would come from a reduction in staff numbers.
Between them, the two groups currently employ 99,450 staff, with BP - the bigger of the two - employing 56,450.
Further savings would be made from more focused exploration, streamlining business processes and extra buying power.
The group will have combined reserves of around 14.8bn barrels of oil and gas and daily production of three million barrels, with a prime presence in all main exploration areas.
It will also be a leading company in the areas of chemicals, petrochemicals and solar energy.
BP has 17,900 service stations around the world, while Amoco has 9,300 - all in the US.
Slump in oil prices
The price of a barrel of Brent crude oil slipped this morning to $11.8 - in real terms the lowest price in 25 years.
Chicago-based Amoco last month reported a fall of more than 50% in second quarter earnings.
Analysts said Amoco, the fourth largest US oil producer, was hurt by its lack of international refining and said a deal with an oil major was only a question of time.
Jeremy Batstone of NatWest stockbrokers said that BP had emerged as the dominant partner.
"It is billed as a merger because there are accounting reasons why that would be more appropriate, but broadly speaking BP is in the top seat," he said.
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