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BP’s US$12 billion clause

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Hydrocarbon Engineering,

BP Plc. is said to be preparing for potential takeover offers but the company has a disclaimer in its Macondo spill settlement, which could add US$12.6 billion to the price. A potential buyer may have to pay penalties that BP agreed to pay the US, as the federal government may demand faster payments during a takeover.

“This would be an important factor for those looking at possible opportunities […] To have to make such substantial upfront payments at a time when cash flows are down so much would make an attempt a lot more difficult,” said William Arnold, a former banker and Executive at Royal Dutch Shell Plc.

Commenting on the accelerator clause, David Berg, a Houston based lawyer, said: “I don’t know anyone who’d want to buy a company with a US$12.6 billion hickey they’d have to pay right away. It makes it harder.”

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Source: Bloomberg

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