World Energy Council Calls for the Privatization of Oil & Gas Markets
World Energy Council Calls for the Privatization
of Oil & Gas Markets
by Brian Van Horn
Who
would have ever thought of a trillion-dollar bank in the United States?
Yet, there are likely to be several of them as the banking industry tries
to compete with both Deutche Bank and the Bank of Tokyo in global markets.
Citigroup will become the first trillion-dollar bank in the United States,
a merger between Citicorp and the Travelers Insurance Group. No sooner had
the deal been announced than it was followed by a merger announcement between
Nations Bank and the Bank of America, and Bank One and the First Bank of
Chicago. U.S. consumers are somewhat concerned about their ability to conduct
banking business with these mega-banks which are also likely to get into
insurance and investment areas outside the traditional commercial bank's
role. Some consumers are looking to credit unions or smaller banks for local
banking needs, but technology eventually may force them to adopt a paperless
banking system in which computer chips replace checks and bank statements.
Banks
are not alone in their merger-mania business environment of today. It involves
every industry, including the oil and gas markets. The May 18th issue of
the Oil and Gas Journal shows a flurry of activity taking
place among both producers and service providers. Changing industry dynamics
and pressures to create value are forcing companies expanding into international
markets to increase their size, financial resources, and personnel in order
to be able to compete in world markets. Deregulation, privatization, and
the opening of formerly closed markets have increased the size of the playing
field. While many companies have turned to their core businesses, it requires
partners with both skills and capital resources, not to mention qualified
personnel. Nearly all of the mergers and acquisitions occurring in the oil
industry today are "friendly" transactions, considered "win-win"
for the shareholders of both companies.
What
happens when the company being taken over doesn't want a friendly merger?
The May 4th issue of The Wall Street Journal says that Pennzoil
recently merged the motor oil portion of its business with Quaker State,
creating a new term: the "chewable poison pill." Pennzoil had
been the target of Union Pacific Resources which had offered stockholders
a generous $84 a share, $20 above market value, which would have added an
additional $1 billion to Pennzoil's value. It was the poison pill that allowed
Pennzoil to say no to Union Pacific Resources. Poison pills shift the power
from shareholders to managers. It gives target company managers leverage
to negotiate higher prices from outside bidders. They can then refuse to
redeem the ills unless the original bidder raises its initial offer. While
Union Pacific Resources was unable to acquire Pennzoil, it did effect a
friendly merger with Norcen, a major Canadian company.,
Exclusive to Bull and Bear readers,
a copy of the book Evaluating An Oil & Gas Investment and
Stock Market Investment In Five Minutes is available for $19.95 by writing
to Brian Van Horn, P.O. Box 305, Ada, OK 74820, or by calling 1-800-368-2086.
NOTE: SEE BULL & BEAR FOCUS
ON BRIAN VAN HORN
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