Should Exxon Mobil buy fellow oil-spill villain BP, now that BP's stock is so low? BP's shares rose Wednesday on that rumor, started by JP Morgan oil analyst Fred Lucas, who figures that BP is about 62 percent undervalued right now, and thus ripe for a pickoff. The other company that could handle such a big merger is Shell, Lucas says, but only Exxon knows "how to price potential clean up costs and associated civil claims." Still, would Exxon really want the hassle of cleaning up another sullied brand? Would BP let it try? (Watch Exxon's CEO testify he wouldn't have made BP's mistakes)
An Exxon buyout actually makes sense: "As fantasy corporate finance goes, an Exxon bid for BP is not as far fetched as it sounds," says Neil Hume in the Financial Times. Exxon has the cash, and the experience absorbing a big rival (Mobil). Plus, BP's natural-gas assets would "complete Exxon’s global jigsaw." In fact, "the economics of an Exxon-BP combination are so compelling," it's surprising the market hasn't already priced it in.
"Fantasy oil major M&A"
Why would BP sell? I'm not buying it, says Damian Reece in The Daily Telegraph. Exxon and Shell are surely "watching events in the Gulf more closely than most," but BP has no incentive to sell out, and its shareholders would hardly embrace a hostile takeover. This is a one-time event from which BP's stock will recover — and if it doesn't, Exxon will want to wait to pick it up for "even cheaper."
"Will BP be bought by a U.S. rival? I doubt it"
Don't bet against the market: Investors obviously like the idea of a takeover, says Charley Blaine at MSN Money Central, and Exxon is the one with the "money and chutzpah" to do it, especially now that BP is "relatively dirt cheap." Would BP sell? Well, it's already hired investment banks Goldman Sachs, Blackstone, and Credit Suisse. "To help fend off unwanted takeover bids? Maybe a bankruptcy?" Stay tuned.
"Could Exxon buy BP?"