BP and E.ON Go Ahead with Veba Deal

BP announced that it has agreed with E.ON to go ahead with its plan to acquire a majority stake in Veba Oil with effect from February 1. The two companies separately said they have agreed in principle to sell Veba's oil and gas production subsidiary to Petro-Canada for $2 billion.

BP will pay E.ON $1.63 billion in cash and assume some $850 million of debt in return for 51 percent and operational control of Veba Oil which owns Aral, Germany's biggest fuels retailer. From the sale of Veba's upstream oil and gas assets to Petro-Canada, BP would receive some $1.65 billion, with the balance going to E.ON.

BP additionally said it would be prepared to pay a further $2.4 billion in cash for the remaining 49 percent of Veba Oil, which E.ON can require it to buy from April 1 this year under the terms of an agreement between the two companies announced in July, 2001.

The agreement envisaged part of the payment for Veba Oil being met by the sale to E.ON of BP's wholly-owned subsidiary Gelsenberg which holds a 25.5 percent stake in Germany's largest gas distributor, Ruhrgas. Although that sale was prohibited by Germany's Federal Cartel Office, it is being appealed to the German Economics Ministry which is expected to rule early this summer.

BP chief executive Lord Browne said: 'The acquisition of Veba Oil will be significantly accretive to downstream earnings from 2003.

'It is a first-class deal for BP. Whether we finance it in cash or partly from the sale of Ruhrgas, it will give BP the largest share of Europe's most important fuels market, rapidly enhance our returns and greatly improve our prospects for downstream growth.'

BP said that if the German Economics Ministry were to approve the Ruhrgas transaction, it would sell its Ruhrgas stake to E.ON for an agreed $2.1 billion.

BP said the acquisition costs of Veba would be partly offset by its $1.65 billion share of the proceeds from the sale of Veba's oil and gas production business to Petro-Canada. These comprise interests in a dozen countries with oil and gas equivalent production totaling some 175,000 barrels a day.

It would also recoup cash from selling retail, refining and chemical assets required to be disposed of by the regulatory authorities as a condition of the deal.