“BP’s Behaviour” Leads To Collapse Of US$7 Billion Deal

By: EW News Desk Team   Date: 7 November 2011

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EconomyWatch, News Desk Team

 

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07 November 2011

Argentinean energy company Bridas Energy Holdings Ltd. has pulled the plug on a US$7.06 billion buyout of BP’s 60 percent stake in Pan American Energy LLC, citing “legal reasons” and “the way BP has behaved during the transaction” as the key reasons behind the failed negotiations.

In an email statement released by Bridas, as quoted by BusinessWeek, the Buenos Aires-based company told the press that it had “informed BP of its decision to cancel the sale”, which had been expected to be concluded by November 1.

The Argentinean energy company, which is half-owned by Chinese state oil producer CNOOC Ltd, had agreed a year ago to buy BP’s stake in Pan American Energy, but had faced difficulty in obtaining approval from Argentine anti-trust and Chinese regulatory bodies for the purchase.

"Securing these approvals was the sole responsibility of Bridas," said a BP spokesperson, as quoted by Reuters. "For reasons known only to them, Bridas has now chosen to terminate the transaction,” he added.

Bridas though have denied BP’s allegations that it had faced strong opposition from the Argentine and Chinese governments for the deal, claiming that both governments “have always acted positively regarding the transaction.”

Despite the setback, BP reassured its shareholders that its stake in Pan American Energy was “not an asset we’re desperate to sell”, adding that the company was "happy to return to long-term ownership of these valuable assets, given the considerable improvement in its own financial strength and circumstances, as well as the improved external trading environment."

 "BP's financial position is far stronger than it was a year ago when this deal was agreed," said a spokesman for the company. In September this year, the company announced cash reserves of over US$18 billion, with its debt-to-equity ratio dropping significantly to 19 percent.

In its statement released on Sunday, BP added that it would repay Bridas for a $3.5 billion deposit that it had received for the Pan American Energy stake, while the company would now be “considering all its strategic options for PAE.”


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