BP TO OFFER 7.4 BILLION DLRS FOR STANDARD SHARES

  British Petroleum Co Plc &lt;BP.L> said it
  intended 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.
  

