BP's Future Owner

With apologies to Robert Reich, I'm not referring to the United States government. However, if the true costs of the spill overwhelm BP (NYSE: BP  ) , would anyone be willing to step up to buy out the British oil giant? According to the New York Times Dealbook, two super-majors are sniffing around and Wall Street firms are daydreaming about the potential mega deal:

Given the plunge in BP's share price -- the company has lost more than a third of its value since Deepwater Horizon blew -- some bankers and analysts say BP is starting to look like takeover bait. The question is, who would buy BP, given its enormous potential liabilities?

Shell (NYSE: RDS-A  ) and ExxonMobil (NYSE: XOM  ) are both said to be licking their chops. And already, flinty legal minds are dreaming up scenarios in which BP would file a prepackaged bankruptcy and separate the costs of the cleanup — and potentially billions of dollars in legal claims — into a separate corporate entity.

It's not surprising that Shell and Exxon are named; they're among the elite few that that could afford to buy or merge with BP. Other players might include Chevron (NYSE: CVX  ) , which has its own legal mess right now, or possibly France's Total. That's about it.

Assuming BP can spin off the liabilities to a separate company, and its valuable trove of deepwater gulf assets aren't permanently lost to regulation, my remaining concern about any future takeover or merger of equals is cultural. Can the Brits take a back seat to the Dutch or the French, or far worse, Texans? It sounds more like a sitcom premise than a recipe for corporate rescue.

A deal could happen if BP were truly crushed under the weight of a massive clean-up and punitive damages bill. But I think a more likely scenario is that the firm will go through an extensive rebranding campaign the likes of which haven't been seen since Philip Morris became Altria.

As for takeover candidates, I think it's more likely you'll see the 25% holder of the leaking Macondo well, Anadarko Petroleum (NYSE: APC  ) , on the block. Anadarko was long rumored to be in the sights of Big Oil before the disaster and, provided the legal risk isn't too severe, should be even more attractive at this discounted price. Also, the smaller company would get more suitors that are hesitant about biting off more than they could chew with BP: companies like ConocoPhillips (NYSE: COP  ) and Occidental Petroleum (NYSE: OXY  ) . 

I'd love to hear what the Foolish community thinks. Will BP be a stand-alone company in five years? Will Anadarko? Or will opportunistic buyers swoop in and gain great assets at a discount? Sound off in the comments below.

David Williamson sadly owns shares of BP. Total is a Motley Fool Income Investor selection. Try any of our Foolish newsletters today, free for 30 days. The Motley Fool has a disclosure policy.


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  • Report this Comment On June 09, 2010, at 1:13 PM, Gonzhouse wrote:

    Unprecedented events have unprecedented consequences. BP as a stand-alone entity is done: stick a fork in them. Everyone talking about BP as an investment believes they can forecast a bottom to the Horizon disaster and they are wrong. The only way any value will be wrung from BP is the article's scenario where the assets are separated from the liabilities. But don't think the asset proceeds will go to BP stockholders. The liability corp will get it first.

  • Report this Comment On June 09, 2010, at 4:45 PM, plange01 wrote:

    what a chance to buy a world wide company at a 50% discount!they have most of the spill stopped and are working on the clean up and compensation..the worse is over.the real problem is what to do with obama who made a fool out of himself on tv in front of the whole country and completely failed to help.he even openly complained he had to cancel a trip to australia to go to the gulf!

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