BP, Arco Fray Over Britoil Is Heating Up

British Petroleum Co. said it will begin buying Britoil PLC shares in two days under its previously announced plan to increase its stake in the company to 29.9%.

Rival bidder Atlantic Richfield Co., which intends to purchase 49.9% of Britoil, also said Monday that it might bid for all of Britoil if BP makes such a move.

Separately, BP said the Kuwaiti government has boosted its stake in BP to 13.07% from the 11.52% announced last week.

The London-based Kuwait Investment Office has been buying BP shares aggressively for the past month as a long-term investment. The shares were issued when the government recently sold off its remaining 31.5% stake in BP.

BP said that once its $5.40-a-share partial offer for Britoil expires Wednesday, it intends to make a new offer or buy Britoil shares for at least $6.30 on the open market until it has acquired 29.9% of the company.

Under British law, a company involved in a takeover may not buy shares in the target company at a price higher than the offer price. This effectively bars BP from adding to its Britoil stake until its offer expires.

Last Tuesday, BP bought 14.9% of Britoil and then offered $5.40 a share for an additional 15%. Last Friday, BP’s offer was topped by a $6.30-a-share offer by Arco. BP immediately sweetened its bid.

Would Cost $3.15 Billion

On Friday, Arco purchased a 7.7% stake in Britoil on the open market at a price of $6.30 a share. Los Angeles-based Arco plans to increase its holding to 29.9% either by buying shares on the market or through a tender offer at the same price.

At that price, Britoil’s 500 million shares would cost about $3.15 billion. Britoil said it had agreed in principle to acquire all or most of the oil and gas exploration and production assets of Arco outside North America and will pay for them through the issue of more Britoil common stock to Arco.

Britoil and Arco said Monday that they will proceed with their plans despite a statement from a United Kingdom regulatory agency that could challenge the second part of the proposed plan.

However, since Britoil shares are trading above Arco’s offered price, it was unlikely that Arco would find sellers.

Arco Chairman Lodwrick M. Cook said at a news conference in Glasgow, Scotland, where Britoil is headquartered, that his company would consider making a full bid if BP did.

“We would give it serious consideration, but only in that event and those circumstances,” Cook said.

However, the government retains a so-called golden share in Britoil that gives it the power to veto the purchase of 50% or more of the company.

The British Panel on Takeovers and Mergers on Monday told Britoil that Arco must seek a waiver if it is to raise its stake to 49.9% from 29.9%.