Why BP CEO Dudley Has Only Three Weeks to Ward Off a Possible Takeover
BP CEO Bob Dudley has less than a month to pull something truly magical out of his top hat, sleeve or wherever he stores his best ideas. That is, if he wants to ward off takeover attempts from BP rivals.
The upshot? Dudley must outline a strategy for BP that will put the company back on track in the long term while calming its panicky investors now. The need for a winning strategy -- something investors expect to be updated on when BP reports its fourth-quarter earnings Feb. 1 -- has been clear since before Dudley took over the BP helm from the hapless Tony Hayward. But the stakes got higher this week on two bits of news: Shell's continued takeover musings and claims fund czar Kenneth Feinberg's remark that half of BP's $20 billion escrow fund should be enough to compensate spill victims.
At first glance, the moment for a takeover seems to have long since passed. By mid-December, BP's shares had rebounded some 58 percent from its recent lows back in June. And Feinberg's remarks as well as the Daily Mail's article that Shell mulled a takeover bid pushed BP's even higher -- and seemingly out of reach. Plus, there are only a handful of companies that could actually swallow BP whole.
That Shell's board considered a takeover last summer is significant. The company has the purchase power and it's reportedly still interested in a takeover, although it would wait for another oil major like Exxon (XOM) or Chevron (CVX) to make the first move. The one big concern for prospective buyers is BP's total liability from the spill. Feinberg's comments provide our first real hint that BP's liability may be less than many feared. We'll get even a clearer picture of the company's liability next week when the National Commission on the BP Deepwater Horizon Oil Spill and Offshore Drilling releases its final report.
If not a takeover, then what?
Dudley has to avoid another problematic development: pressure to sell off valuable bits and pieces of BP. Major investors in BP worried that the share price will now recover to those 650 pence pre-spill days may try to push the company to sell off assets, and not kind of assets that the company has sold off recently. Instead, it would be bigger and more valuable pieces of the company that Shell would waste little time snapping up.
Photo from BP
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