Vastar Board Supports $83/Share BP Buyout
Vastar Resources Inc.'s board of directors last week unanimously
recommended approval of a $83/share cash merger offer from BP
Amoco. London-based BP Amoco already owns 81.9% of Vastar's common
stock, acquired through last month's completed merger with Atlantic
Richfield Co. BP Amoco would acquire 18.1%, or 17.7 million shares,
of Vastar common stock that is now publicly held.
BP Amoco's offer of $83 a share for Vastar stock is quite a step
up from its original offer of March 16 for $71 a share. The price
rose following negotiations by a special committee made up of
Vastar's and BP Amoco's board. In the end, both sides considered
the price offer a win-win situation.
"The $83/share offer recognizes both Vastar's historical and
prospective ability to create differential shareholder value," said
Vastar's Robert LeVine, chairman of the special committee. "The
special committee is pleased with the outcome of this process and
believes that fair value for the minority interest shareholders has
Vastar's James Bartlett believes the shareholders will be
getting a "good price" for their stock if they approve the buyout.
"They will get a 17% interest on their return," he said, "and this
is really the icing on the cake." Bartlett said that Vastar was
proud of what it had achieved so far, and the rate of return and
increases in price on stock for its shareholders.
BP Amoco also was pleased that the merger was moving closer to a
"The deal seems to make sense, and we are happy to be able to
bring this to a conclusion," said Hugh Depland, director of public
affairs for BP Amoco's Gulf of Mexico business. "Having this
completed, we'll be able to bring in the assets, look at the
opportunities available between these two companies, and take
advantage of the synergies that are already in place."
Both companies said it was premature to discuss operational
plans for the future. However, Depland said that a merger would add
to BP's acreage, reserves and discoveries. "We'll be able to do
things jointly, holistically and synergistically," he said. "On the
face of it, we already own 81%, and without owning the rest, we
might have ended up in a position where we were going to have to go
to lease-sales and we might have had to bid against ourselves."
BP Amoco CEO Sir John Browne described the merger as "the final
step associated with the ARCO union," and said, "this move allows
BP Amoco to achieve substantial cost-savings and synergies to
create significant value for shareholders. It also enhances our
leading deepwater Gulf of Mexico portfolio and boosts our position
in natural gas."
No personnel changes were mentioned either, but Depland said
that BP Amoco's Browne is on the record as saying that the company
"is always in need of bright, talented managers. It is his
understanding that Vastar has a considerable amount of talent on
board. And I'm sure we'll bring forward all of those opportunities
when this is concluded."
Bartlett could not comment on the future of Vastar's
1,150-member workforce, based primarily in Houston. "We have a
stellar development program, and there are a lot of reasons we were
considered an attractive buy to BP. We are hopeful that BP will
recognize the excellent business force it has in Vastar," he said.
Before a shareholder vote is taken, Bartlett said a proxy
statement has to be completed and mailed to shareholders who then
in turn will vote on the offer. All of this could take up to 75
days, but he anticipates no problems and said "we expect the
shareholders will accept the offer."
The acquisition is structured as a merger of a wholly-owned
indirect subsidiary of BP Amoco into Vastar and will not involve a
tender offer. The merger is contingent on the approval by the
holders of at least two-thirds of the Vastar shares not held by BP
Amoco at a meeting scheduled for this summer.
Vastar, which has been an independent for nearly six years,
explores and produces oil and natural gas, and is heavily focused
on offshore developments in the Gulf of Mexico, where BP Amoco is
already one of the top producers. Vastar is active in more than 100
producing fields, with exploration and production activities in the
Gulf of Mexico shelf and deepwater, Gulf Coast, Rocky Mountains and
Mid-Continent areas. According to company records, Vastar's
reserves in the past six years increased by 59% to a record of
nearly 4.1 Tcf of gas equivalent at year-end 1999. Annual average
daily equivalent production increased by 38% in the same time
period, reaching a record 1,438 MMcf in 1999.
BP's merger with Vastar should help it cut costs and shore up
its position as a leader in the deepwater Gulf of Mexico. BP had
announced plans to raise its gas production over the coming years,
and the company wants its gas production to rise to 8 Bcf/d by the
end of this year, and to 9 Bcf/d by the end of 2001. In 1999, BP
produced about 6 Bcf/d.
Carolyn Davis, Houston