<BREAKFAST WITH THE FOOL>

Monday, March 29, 1999

"A fool and his money are soon elected" -- Button seen in Harrisburg, Pa.

Latest Market Numbers

BP Amoco, Arco Talking Merger

BP Amoco (NYSE: BPA), the company formed earlier this year by the $61.7 billion merger of British Petroleum and Amoco, confirmed that it is in discussions to further expand its already sizable oil and gas assets by linking up with U.S. integrated firm Atlantic Richfield (NYSE: ARC) in a "possible combination transaction."

If the two sides can agree on the terms of a full-scale merger, the combined company would sport a market capitalization of $162 billion and combined fiscal 1998 revenues of $93 billion, enormous by most standards but still second-fiddle to the estimated $289 billion market cap and $171 billion in sales represented by the proposed combination of Exxon (NYSE: XON) and Mobil (NYSE: MOB). BP Amoco would further extend its operations in the U.S., adding Arco's exploration and production assets on Alaska's North Slope and in the Gulf of Mexico, through its Vastar Resources (NYSE: VRI) affiliate. Those assets would boost BP Amoco's combined daily production to about 4 million barrels of oil equivalent (BOE), firmly in Exxon Mobil territory.

While the Amoco acquisition set worldwide size records when it was announced last August, the combination has been effected quickly and without a hitch, freeing up BP Amoco to look for other possibly underpriced assets to acquire during the continuing low oil price environment. The company is expecting to realize $2 billion in annual Amoco merger-related synergies by next year -- a year ahead of schedule -- in part by shedding an estimated 10,000 jobs, or a third more than originally expected.

A merger with Arco would likely bring similar cost cutting initiatives at the Los Angeles-based company, which has found itself in a tough spot amid the recent consolidation of the oil and gas sector. Like fellow U.S. firm Texaco (NYSE: TX), some observers feared Arco would be left behind as the oil industry transitions to a global business led by a handful of "super majors" with massive economies of scale in production and unparalleled distribution reach to the worldwide energy markets of tomorrow. With an estimated price tag of $25 billion in an all-stock transaction, BP Amoco would be acquiring Arco's total reserves of 4.48 billion BOE for a little over $5.50 per barrel -- roughly the same price BP paid for Amoco last year.

News to Go

Online retailer Amazon.com (Nasdaq: AMZN) announced plans to start a person-to-person auction service through its popular website. According to The Wall Street Journal, the company has reportedly struck deals with 117 companies to operate auctions offering "virtually anything."

TV broadcaster CBS Corp. (NYSE: CBS) is in talks to buy Jeopardy! and The Oprah Winfrey Show producer and syndicator King World Productions (NYSE: KWP) for as much as $3 billion, according to various reports. Other bidders may also include Japanese entertainment conglomerate Sony Corp. (NYSE: SNE) and Fox Entertainment Group (NYSE: FOX).

The Food and Drug Administration said on Friday that Warner-Lambert's (NYSE: WLA) Type II diabetes drug Rezulin should continue to be sold to patients in the U.S. despite the fact that it has been linked to 28 liver failure deaths. However, the drug's labeling may be changed as a further precaution. Warner-Lambert said it is working with the FDA to "further refine the label."

Life sciences company American Home Products (NYSE: AHP) said it will cut 2,500 jobs at its Wyeth-Ayerst drug making unit, or about 6% of the business's global staff, and discontinue its research efforts in the cardiovascular and metabolic disease treatment areas, according to a report in the Philadelphia Inquirer.

Bank holding company Wells Fargo (NYSE: WFC) disclosed in its annual report to shareholders that it will spend about $280 million over the next two years to cut about 5% of its workforce following last year's merger with Norwest Corp. Most of the cuts will affect redundant headquarters and back-office staff positions.

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Brian Graney (TMF Puck), Writer
Jennifer Silber (TMF Amused), Editor