British Petroleum Co Plc &lt;BP.L> said itintended to make a tender offer for the 45 pct of Standard Oil
Co &lt;SRD.N> it does not already own at 70 dlrs a share cash, for
a total of 7.4 billion if the offer is fully accepted.
    The offer would be made through its &lt;BP North America Inc>
unit and was intended to commence not later than April 1. The
offer would not be conditional on any minimum number of shares
being tendered.
    BP said in a statement the 70 dlr a share price was based
on its own valuation as well as those of its financial
advisers. It took into account reviews of both public and
non-public information.
    Standard closed in New York last night at 64-7/8 dlrs, down
1-3/4 dlrs.
    BP shares dropped on the announcement to 877p from 888p at
last night's close.
    About a third of the cash payable would be met from BP's
own resources.
    The remainder would come from new borrowings, partly from
banks under a four-year committed revolving credit facility and
partly from a a new U.S. Dlr commercial paper programme. The
company said it was in the course of arranging these
facilities.
    BP Chairman Sir Peter Walters said that the group's
investment in Standard was its largest single asset. Full
ownership would enable investment and operating decisions to be
made without the limitations of a minority interest.
    BP also believed the acquisition represented the optimum
use of its financial resources. It was confident oil prices
were likely to remain within a range sufficient to justify the
investment.
    Walters added that it also felt that, due to management
changes in 1986, Standard could now operate successfully even
in a lower oil price environment.
    Standard's net assets at end-1986 were 7.02 billion dlrs
and in the year it reported a loss of 1.08 billion dlrs before
tax and before an extraordinary item of 608 mln dlrs.
    Analysts said that the move by BP had come as a surprise.
One noted that it was not immediately clear why the group
should spend so much money buying a company it already
controlled.
    BP could also have bought up the remainder of Standard
shares considerably cheaper had it moved six months ago.
    It was also unclear what effect the tender would have on
the U.K. Government's recent announcement that it intended to
dispose of its remaining 31.7 pct stake in BP sometime in the
1987/88 financial year, analysts said.
    Analyst Paul Spedding of brokers Kleinwort Grieveson noted
that any effect on the government sale of its stake in BP would
depend on the reaction of the markets.
    The deal would probably push BP's gearing up to around 59
pct from 20 pct currently, he said.
    However, with the likelihood that oil prices would not
repeat last year's rapid drop the prospects for Standard
returning to profitability this year -- and BP benefitting from
its cash flow -- were good.
    Standard was a high cost oil producer, the analysts noted.
    Spedding noted that it needed about 12 dlrs a barrel to
make money, and at about 15 dlrs a barrel revenue from
production and its downstream activities would push it
comfortably into surplus.
    BP initially took a stake in Standard following the
discovery of oil in Alaska's Prudhoe bay in 1969. BP had
inadequate distribution facilities in the U.S. While Standard,
which was strong on marketing and refining, was short on crude
oil.
    The analysts said that BP had promoted a major management
reorganisation of Standard in the past year.
    The probability that much of the shake-up at Standard was
now complete was one possible factor behind the timing of the
tender offer, Spedding said.
    BP's willingness to take hard decisions such as major
balance sheet write offs and the sale of assets had been well
received in the markets.
    The lower costs that should now be possible -- especially
after the rationalisation of the loss making minerals division
-- should allow the benefits of an oil price recovery to come
straight through to 1987 profits without being cut back by
other sectors.
 REUTER
