Amoco Plans to Pay $3.9 Billion for Struggling Dome Petroleum

TORONTO — The Canadian subsidiary of Amoco Corp. said Saturday that it had reached an agreement in principle to acquire Dome Petroleum Ltd., the debt-ridden Canadian oil and gas giant, for the equivalent of $3.9 billion.

Amoco Canada Petroleum Co., wholly owned by Chicago-based Amoco, said in a statement from its headquarters in Calgary that it had signed a “binding” memorandum of agreement to acquire Dome, which had been negotiating with three suitors.

Analysts expect other bids to follow despite the fact that both companies said the deal was final.

Political Trouble Seen

The agreement with Amoco is certain to spark political trouble in Canada, where opposition parties have called for government intervention to keep Dome in Canadian hands. Prime Minister Brian Mulroney’s government, which must approve any foreign takeover, has said it would not interfere in Dome’s business.

The government favors Canadian ownership in the oil industry but has said it would support foreign takeovers of ailing concerns such as Dome, which has $4.6 billion in debts, compared to assets valued at $3.7 billion.

Both Calgary-based Dome and Amoco Canada said the companies were working toward a definitive agreement to merge. The deal would give Amoco huge oil and gas reserves, and a merger would create one of the largest companies in Canada’s oil industry.

Dome valued the deal--a combination of cash, Amoco Canada debt securities and debentures exchangeable into common stock of Amoco’s U.S. parent--at $5.1 billion in Canadian dollars, or $3.9 billion U.S. at recent exchange rates.

Dome said shareholders would receive securities exchangeable into common stock of Amoco Corp. valued at the equivalent of $5.32 per Dome preferred share and $1.14 per common share.

Shareholders Must Approve

Dome shareholders and creditors must approve the deal, the company said.

Dome Chairman J. Howard Mcdonald said the agreement offers the best solution to the company’s problems and clearly is better than Dome’s own debt restructuring plan.