The $12 Billion Reason BP Isn't Worried About a Hostile Takeover

The $12 Billion Reason BP Isn't Worried About a Hostile Takeover
BP, which was said to be readying defenses for potential takeover offers, has a little-known ace in the hole: a disclaimer in its Macondo spill settlement that could tack $12.6B onto the price tag.

(Bloomberg) -- Oil giant BP Plc, which was said to be readying defenses for potential takeover offers, has a little- known ace in the hole: a disclaimer in its Macondo spill settlement that could tack $12.6 billion onto the price tag.

A potential buyer might be forced to accelerate the payment of as much as two-thirds of the $18.7 billion in penalties the company agreed to pay the U.S. and several states, according to company filings. As it stands, BP has more than 15 years.

An option that gives the federal government and some states the ability to demand faster payment in a takeover effectively hands them a veto over any deal. Together with the company’s exposure to Russia amid sanctions and the worst oil crash in decades, it amounts to a powerful deterrent to suitors, said William Arnold, a former banker and executive at Royal Dutch Shell Plc.

“This would be an important factor for those looking at possible opportunities” in many of the deal-focused war rooms that form in oil and gas down-cycles, said Arnold, who teaches at Rice University in Houston. “To have to make such substantial upfront payments at a time when cash flows are down so much would make an attempt a lot more difficult.”

Deals Wave

Bankers, lawyers and energy executives expect a wave of major deals to hit the industry as many companies struggle under the onus of oil prices that have fallen by more than half since last year. West Texas Intermediate crude traded at $45.16 a barrel as of 10:25 a.m. New York time on Monday.

After Shell announced in April that it planned to buy BG Group Plc for $70 billion, London-based BP was said to review strategies to ward off suitors earlier this year, according to people familiar with the matter at the time.

Geoff Morrell, a spokesman for BP, declined to comment.

The structure of its settlement of government claims tied to the 2010 spill, which poured more than 3 million barrels of crude into the Gulf of Mexico and caused the deaths of 11 workers, allows the federal government or states to demand more immediate payment "in the event of a change of control or insolvency of BP,” the company disclosed July 28.

Such demands on the part of the Justice Department in large-scale settlements aren’t unusual, as they protect the ability of the government and plaintiffs to be paid even in uncertain circumstances, said Brandon Barnes, an energy litigation analyst at Bloomberg Intelligence in Washington.

‘BP Creditor’

“They have become a BP creditor,” Barnes said.

The accelerator clause tucked into BP’s settlement of government pollution and spill-damage claims creates a “disincentive” for anyone looking to take over the British oil major, according to David Berg, a Houston-based lawyer who has negotiated many settlements between polluters and municipalities.

“I don’t know anyone who’d want to buy a company with a $12.6 billion hickey they’d have to pay right away,” Berg said. “It makes it harder.”

--With assistance from Rakteem Katakey in London and Matthew Campbell in Athens.

To contact the reporters on this story: Laurel Calkins in Houston at; Bradley Olson in Houston at To contact the editors responsible for this story: David Marino at Susan Warren.

Copyright 2016 Bloomberg News.


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John | Oct. 2, 2015
If I were the US Government or any other creditor wouldnt I be looking to upgrade my credit exposure. If a AAA credit came along to buy out one of my lesser credits I would have much more certainty of payment. I would think the right decision would be for the government to determine if a new buyer needed to accelerate payments if they were a better credit and could manage the same terms of payment BP has on its books,,As a taxpayer I would support a credit uplift all day long!!!!

Rob | Oct. 2, 2015
This is the US Government setting themselves at the front of the creditor list to protect teir taxpayers. I dont suppose they would accept anything less than BP managements agreement to this.

Kal | Sep. 28, 2015
Warding off potential buyers is nothing short of senior managementís attempt to protecting their jobs at the expense of shareholders. If a another company is willing to make the shareholders (owners) of the company an offer they canít refuse, why would senior management add a hurdle and make it less attractive to the potential buyer? I think thatís we see huge senior management payouts during mergers and acquisitions. This is unethical at best!

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