Abu Dhabi’s state-owned oil company reportedly recently explored a multibillion-pound bid for BP, in a sign that depressed share values in London are making even the biggest British businesses takeover targets.
Abu Dhabi National Oil Company (Adnoc) considered options including buying BP or acquiring a large stake before deciding it was not the right fit and abandoning preliminary discussions, according to Reuters.
Adnoc and BP spoke directly in recent months and the United Arab Emirates firm also sought advice from investment banks on a potential deal, although discussions did not progress far, the report added.
Shares in BP rose by more than 2% in early trading to 530.5p, valuing the company at £89.4bn.
The reported takeover talks have come to light just months after BP’s chief executive, Murray Auchincloss, was forced to downplay speculation that the oil company could become a target after reporting weaker than expected quarterly profits last October.
The future of BP was cast in doubt following a wave of mega-mergers in the US oil industry and after the shock exit of the company’s chief executive, Bernard Looney, in early September.
At the time Auchincloss said he was not concerned about the takeover speculation because BP was trading at multiples to earnings that were similar to the European oil companies Shell and Total. He said BP had also started to close the valuation gap between the company and its US competitors.
BP has underperformed against its competitors in recent years, which investors and analysts have blamed on the company’s high-profile green pledges including a commitment to produce 40% less oil and gas by the end of the decade. The company watered down the target last year to a 25% reduction after revealing bumper oil and gas profits following the war in Ukraine.
BP and Adnoc already have a number of joint ventures, including a link-up to develop gas assets in Egypt announced in February and a separate partnership last year to acquire a 50% stake in the Israeli natural gas group NewMed, although this investment is on hold.
BP’s ties to the UAE predate the founding of Adnoc more than 50 years ago. The company was part of a consortium of western oil majors that spearheaded the exploration of oil and gas across the Middle East and helped to discover oil in the emirate in 1958. In recent years BP has acquired shareholdings of 10% in Adnoc’s onshore, liquified natural gas and gas shipping subsidiaries.
Adnoc and BP declined to comment.
UK companies have recently attracted takeover interest because of relatively lower share values in London’s stock market, which have prompted companies including CRH and Flutter to move their listings to New York.
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Shell’s chief executive, Wael Sawan, and its former boss Ben van Beurden have recently made comments suggesting the oil company may choose to list on the New York Stock Exchange because US investors are “more positive” about fossil fuels.
BP confirmed Auchincloss as chief executive earlier this year, succeeding Looney, who resigned last year for failing to disclose past relationships with colleagues. The company has committed to a huge share buyback programme and has said it wants to purchase $3.5bn (£2.8bn) of its shares in the first half of 2024 and at least $14bn in stock in 2024 and 2025.
Reuters said political considerations had also surfaced as a factor in Adnoc’s decision not to proceed with a takeover. The UK government has the power to intervene in acquisitions in industries including energy under the National Security and Investment Act, which came into force in 2022.
The government also recently introduced legislation to prevent UK newspapers being bought by foreign state-owned companies after RedBird IMI, a partnership backed by Sheikh Mansour bin Zayed al-Nahyan, the UAE’s vice-president, and the US investment firm RedBird Capital Partners, tried to buy the Daily Telegraph newspaper. However, this legislation is intended just to apply to newspaper groups.
