Thatcher Government to Sell 31.5% BP Stake in Biggest-Ever Stock Offer

From Reuters

In what will be the biggest share offering in history, the British government will sell its remaining stake in British Petroleum Co. in late October for the equivalent of $12.1 billion, the government’s financial advisers said Thursday.

Prime Minister Margaret Thatcher’s government, which has sold more than 20 state-owned companies to the investing public, will sell its remaining 31.5% stake in BP for $9.7 billion and $2.4 billion worth of new shares, they said.

About a fifth of the shares will be offered to foreign investors, said Anthony Alt, director of the government’s advisers at N. M. Rothschild & Sons.


“Considerable interest has already been shown from overseas, and a significant proportion of the offer will be made available in these markets,” he told a news conference.

Has Raised U.S. Presence

Currently, 6% of BP is foreign-owned, whereas more than half the oil company’s assets are abroad. Last month, it purchased those shares in Cleveland-based Standard Oil Co. that it did not already hold for $7.8 billion, lifting it to No. 3 among world oil companies.

By acquiring all of Standard Oil, BP has raised its presence in the United States and stands to gain from Standard’s large Alaskan reserves should oil prices rise again. Standard is the second-largest producer of U.S. oil after Exxon.

The British government’s stake in BP has been gradually reduced since 1977 to just under a third from 68.4% through four prior stock offerings, three by Thatcher’s Conservative government.

Most of this final offering will be aimed at British financial institutions and private investors, who have more than tripled in number since the government launched its privatization program.

The portion earmarked for foreign investors from the United States, continental Europe and Japan may be reduced if the domestic demand is overwhelming, Alt said. That may well occur--earlier sales of state companies, such as the utilities British Gas and British Telecommunications, have been heavily oversubscribed.

Industry analysts said the BP shares offered will probably sell out quickly, especially since investors will receive full dividend payments even before they have paid fully for the shares, which can be purchased in three installments.

“I think it will be priced to go--barring catastrophe,” said analyst Michael Unsworth of Smith New Court in London.

BP said in a statement that it will launch an extensive marketing campaign with mailings and television spots to ensure that everyone in Britain is aware of the offering.

Up to now, the largest sale of a state-owned company has been the $9-billion stock offering of British Gas. British Telecom was sold in 1984 for about $6.4 billion.

Once known as the Anglo-Persian Oil Co., BP was among the first companies to tap the oil fields in the Middle East. It has recently become a big producer of North Sea oil and, through its American subsidiary, extracts oil from Alaska.

Its net income fell 49% last year to $1.32 billion because of the sharp drop in oil prices. But its earnings jumped nearly 50% to $510 million in the most recent quarter.

The London government announced in July that it would purchase a block of new shares for $2.4 billion that will be sold with the rest of its holdings in BP. The company said that issue would improve its balance sheet.

BP employs 127,000 people and has holdings in about 1,900 subsidiaries and associated concerns in more than 70 countries.

The investment houses handling the overseas portion of the stock offering include Goldman, Sachs & Co. in the United States, Wood Gundy Inc. in Canada, Daiwa Securities in Japan and Swiss Bank Corp. International in Europe, Alt said.

Further details of the issue will emerge at an upcoming shareholders’ meeting and in a preliminary prospectus due in late September and in the final prospectus due mid-October, he said.

THE 10 LARGEST U.S. IPOs Even the largest initial public offerings in U.S. corporate history are dwarfed by BP’s $12.1-billion stake.

Amount Company Date in billions Nuveen Municipal Value Fund June, ’87 $1.50 Consolidated Rail March, ’87 1.40 Duff & Phelps Jan., ’87 1.20 Henley Group May, ’86 1.19 MFS Multimarket Income Trust March, ’87 1.10 Coca-Cola Enterprises Nov., ’86 1.00 MFS Government Markets Income Trust May, ’87 0.850 Fireman’s Fund Oct., ’85 0.824 First Australia Prime Income April, ’86 0.750 Rockefeller Center Properties Sept., ’85 0.750

Source: IDD Information Services