Amoco To Be Bought By BP -- 6,000 Layoffs Expected In $48 Billion Merger

CHICAGO - British Petroleum is buying Amoco, the fifth-largest U.S. oil company, for $48 billion - or $50 a share - in what would be the largest industrial merger in history.

About 6,000 people are expected to lose their jobs.

The combined company will be called BP Amoco.

Today's deal surpasses the $36 billion purchase of Chrysler by Germany's Daimler-Benz, announced in May as the biggest industrial marriage. Overall, the deal ranks fifth, behind some big transactions in banking and telecommunications.

"It gives each company what they were lacking. Amoco will get the refining and marketing exposure it needs overseas. BP will beef up its presence in the U.S. and give it more shareholders," said Fadel Gheit, an analyst with Fahnestock & Co.

BP Chief Executive Sir John Browne told a news conference in London that the combined company would slash 6,000 jobs, with most of the cuts coming from operations in Cleveland and Houston.

Amoco is already the biggest producer of natural gas in North America. Combined with British Petroleum's production in Alaska, the merged company would be the biggest producer of oil and gas in the United States.

The BP Amoco group will have combined oil and gas reserves equivalent to about 14.8 billion barrels, and daily production of about 3 million barrels. BP is already the world's third-largest oil company, and the deal will make it a bigger rival to No. 1 Royal Dutch/Shell and No. 2 Exxon.

Based on last year's numbers, the new BP Amoco would have annual revenue of $108 billion.

Browne will head the new group. Its board will be co-chaired by BP Chairman Peter Sutherland and Amoco Chairman Larry Fuller.

Amoco's office in Chicago will be headquarters for the group's North American refining, marketing and transportation business and its worldwide chemicals business. In the United States, BP gasoline stations will be renamed Amoco.

In response to the deal, investors pushed BP and Amoco shares sharply higher on the New York Stock Exchange.

Amoco shareholders will get 3.97 BP shares, in the form of American depositary receipts, for each Amoco share. BP shareholders will own 60 percent of new company and Amoco shareholders 40 percent. How much debt BP will assume was not immediately known.

Amoco has been struggling recently to refocus its growth overseas, a belated effort to catch up with other American oil companies that have moved away from the maturing U.S. marketplace.

The Chicago-based company last year sold about one-third of its domestic oil and natural-gas properties. For the first six months of this year, Amoco's profit fell nearly by half, to $673 million.

U.S. oil-company stocks have been battered this year because of overproduction by world oil producers and falling demand from important Southeast Asian countries.

Industry sources said that the companies aimed to complete the merger by the end of 1998 and that they did not foresee any regulatory hurdles.

Information from Bloomberg News and Reuters is included in this report.