Boards Approve Arco’s Takeover of Tricentrol : Total Price for British Firm May Hit $600 Million

On its second try, Atlantic Richfield appeared Wednesday to have finally taken control of a British oil company. Arco and Tricentrol PLC, a medium-sized United Kingdom oil producer, said their boards agreed to the purchase for about $332 million.

The total cost to Arco will approach $600 million because the Los Angeles-based company is also assuming Tricentrol’s debts, an Arco spokesman said. The exact cost wasn’t clear because of uncertainty over what Arco has paid for shares so far on the open market.

But in London, an investment analyst familiar with Tricentrol called it “a very generous price from Tricentrol’s viewpoint.”

Arco shares rose $1.25 on the New York Stock Exchange to $75.675 on the news of Tricentrol’s acceptance.

Arco began a raid on Tricentrol’s on Jan. 28, when it bought 14.8% of the company. That pitted Arco against the French energy concern, Societe Nationale Elf Aquitaine, which already held 7.9% of Tricentrol’s 93.4 million outstanding shares.

After Tricentrol rejected an Elf bid of about $2.82 per share for the balance, Arco said it bid about $3.52. That sum was agreed upon Tuesday at a New York meeting of Arco Chairman Lodwrick Cook and his Tricentrol counterpart, James Longcroft, Arco officials said.

Elf Aquitaine had no immediate comment on the agreement between Arco and Tricentrol, but analysts didn’t expect the French concern to counter. Arco said it launched another raid Wednesday, and by day’s end held “between 40 and 50%” of Tricentrol.

Quit the Contest

It is a modest undertaking for Arco compared to its bid earlier this winter for Britoil, the U.K.’s largest independent oil company. Britoil has roughly 10 times as much oil and gas as Tricentrol, but Arco officials said it also would have cost about 10 times as much.

Arco bowed out of a bidding contest for Britoil on Jan. 22 after its rival, British Petroleum, bid the price too high to suit Arco. But the U.S. firm came away with about $238 million in pretax trading profits.

Like Britoil, Tricentrol owns oil and gas reserves in Britain’s North Sea. Arco has said its interest in North Sea holdings stems from a desire to diversify its holdings internationally and to offset the expected decline of its vast Alaska oil reserves, a strategy generally praised by analysts.

Arco said Tricentrol owns proven oil and gas reserves equivalent to about 110 million barrels, compared to Britoil’s 1.2 billion barrels. But the U.S. company said it believed that it would have had to pay $5 billion, including the assumption of Britoil debt, to acquire the larger U.K. company.

Arco said the Tricentrol acquisition will cost it about $5.45 per barrel.

Tricentrol’s reserves are mainly in natural gas, and they will be inexpensive to develop because of their location in the south part of the North Sea, which is shallow and has mild weather compared to other sections of the oil-rich region, a London analyst said.

The analyst also said the company has “a lot of very good exploration acreage” elsewhere in the world, including Syria and Colombia.