BP: BP should focus on finding new leadership, not a white knight. The oil giant could theoretically be a sitting duck for a hostile bid when it manages to plug the leak in the Gulf of Mexico. But the best way to avoid such an outcome is to appoint a new chairman and new chief executive — not bring in an investor via a sweetheart deal. The chances of BP falling prey to an opportunistic bid are not that high. Even after the slide in its share price, its market capitalisation of £61 billion makes it quite a mouthful. Politics would also complicate a bid from mooted suitors such as Petrochina or Gazprom. That said, the scenario is not so unlikely that it is silly for BP to man its defences. The issue, rather, is how to go about it.
Press stories in the UK last weekend suggested that BP is considering persuading a strategic investor, say from the Arabian Gulf, to take a stake. One version of this scheme — selling new shares in a sweetheart deal — would not be sensible. The company’s position until now has been that it does not need more capital. What’s more, existing shareholders would rightly be worried that their pre-emption rights were being side-stepped. Such an off-market transaction might protect incumbent management, but would not boost the share price.
Fortunately, BP doesn’t seem to be going down this route. Its preference is for an investor to buy shares in the market, according to somebody familiar with its thinking. While there is nothing objectionable with this approach, it looks a bit back to front.
What BP really needs is a good investment story. That ought to be based around putting the past behind it. Plugging the leak is the essential first element. Investors will then find it easier to quantify the damage. But the second element is plugging the leadership vacuum. The crisis has exposed the inadequacies of both the company's chairman, Carl-Henric Svanberg, and the chief executive, Tony Hayward. If BP can find credible new leadership, investors will flow back — and the risk of an opportunistic takeover will fade.