BP Pursues Britoil Bid; Target Urges Rejection

LONDON — Despite major obstacles, British Petroleum Co. PLC pressed ahead Thursday with its $4.13-billion cash offer for Britoil PLC, which quickly rejected it.

The British government has said it would block any bidder from obtaining control of the board of directors of Britoil, an independent North Sea oil company based in Glasgow, Scotland.

And Britoil already has reached a competing, friendly agreement for Atlantic Richfield Co. of Los Angeles to acquire a partial stake.

Under Britoil’s friendly agreement with Atlantic Richfield, Arco plans to buy an ultimate stake in Britoil of 49.9%.

Arco, which already owns nearly 24% of Britoil’s stock, intends to purchase as much as 29.9% in the market and the remainder through the swap of Arco assets for new Britoil stock.

Arco said Thursday that it had increased its Britoil stake to 23.73% from 23.59%.

“Britoil has a large exploration portfolio but does not, we believe, have the financial resilience necessary to exploit it as rapidly and effectively as it deserves,” BP Chairman Sir Peter Walters said.

The oil giant previously has said it would offer $8.19 (450 pence) a share for the 70.1% of Britoil it does not already own. BP confirmed the cash offer in a document sent to Britoil shareholders Thursday.

Urged to Reject Bid

BP also said it would offer Britoil shareholders a lower-value alternative of cash and BP stock. At BP’s share price Thursday that alternative values Britoil’s shares at 442 pence each, or a total of 2.23 billion pounds for the company.

Under its alternative offer, which isn’t available to Britoil shareholders in the United States or Canada, BP is offering one of its common shares plus 190 pence in cash for each Britoil common share. Britoil has a total of 504 million shares outstanding.

Britoil said its shareholders should reject BP’s offer because the bid “substantially undervalues” Britoil’s assets.

Britoil shares closed at 459 pence Thursday on the London Stock Exchange, down 6 pence from late Wednesday. The shares had surged Wednesday on speculation that BP might unveil a higher offer, but fell after the announcement Thursday to 452 pence, down 13 pence.

BP shares were down 2 pence at 252 pence.

Britoil Chief Executive David Walker said the company is confident an independent assessment of its assets “will establish Britoil’s asset value at a level substantially higher than 450 pence per share.”

Kuwait Buying Shares

The assessment by independent consultants will be completed shortly, Walker said.

Such an assessment could give Britoil a value of at least 500 pence a share, analysts said.

The Kuwaiti government has been acquiring BP shares in recent months, building up a BP stake of more than 18% through its London-based investment agency, the Kuwait Investment Office.

BP has said the Kuwaiti authorities assured it that they don’t intend to seek a management role in or control of BP.