The Urge to Merge.

• Author: KANE, ROGER
• Position: Alaska firms

Alaska Enterprises Attractive to Outside Companies

Driven by a thriving national economy, a wave of mergers and acquisitions swept through Alaska's business community in 2000, leaving few industries untouched.

"Clearly the trend nationally does have an effect on Alaska. If the situation is right in the Lower 48, there will be a spill-over effect in Alaska," said Matt Berman of the Institute of Social and Economic Research at the University of Alaska Anchorage. "The merger wave is driven by what's happening in the economy," he said. "We have a booming stock market; there's a lot of cash floating around."

Berman said the telecommunication industry is one area wide open to mergers and acquisitions because of rapid technological changes and deregulation. There has been a lot of activity in the financial sector in recent years, largely because of what he calls "cheap money" in circulation, thanks to the big gains in the stock market.

In the petroleum industry, specifically speaking of companies operating on the North Slope, the sale of ARCO seemed imminent after the company posted nearly $8.5 billion less in gross earnings in 1998 than it did the year before.

Petroleum Industry Giants Get a Little Bigger

In the petroleum industry, Arco Alaska Inc. took center stage as its parent company, the Atlantic Richfield Co., played out its merger with BP Amoco. Conjoining ARCO and BP was no easy task. For more than a year, federal regulators, politicians and corporate executives wrangled over ARCO's Alaska interests.

The Federal Trade Commission finally approved the takeover April 13 and BP purchased ARCO for $27 billion. However, BP Amoco was forced to sell ARCO's North Slope operations, Arco Alaska Inc.

Phillips Petroleum Co. bought Arco Alaska for $6.5 billion, which includes Arco Alaska's 22 percent share of the trans-Alaska oil pipeline and its Anchorage office building. The Phillips Petroleum Co.-owned corporation is now called Phillips Alaska Inc.

While BP Amoco was forced by the FTC to part with Arco Alaska, the merger gave the British multinational a coast-to-coast presence in the United States, and its 18,000 retail outlets make BP the largest gasoline retailer in the U.S.

Since the merger, Phillips has seen greater alignment in the company's interests in the Prudhoe Bay Unit, which should speed the development of satellite fields, according to Dawn Patience with Phillips Alaska Inc.

"Phillips' greater interest in Prudhoe Bay has also moved the company into position as Alaska's largest producer. Today we're averaging about 350,000 barrels of oil a day," Patience said.

New technology helps make drilling operations more efficient, as does a streamlined work force. While Phillips' acquisition of Arco Alaska did not result in job losses, about 210 former Arco Alaska employees are now BP Exploration (Alaska) Inc. employees, which reduces the...