A New Suitor for Conoco?

HOUSTON -- Just one day after Conoco Inc. and Phillips Petroleum Co. announced plans to merge, creating an oil company with a market value of $35 billion, the stock markets were abuzz yesterday with speculation that another suitor might emerge to woo Conoco. Under the terms of the transaction with Phillips, which the companies are calling a merger of equals, Conoco shareholders would receive 0.4677 share of the new company for each share they now own -- which would not be a premium over Conoco's market value. Such news would typically drive down the share price of a company involved in a merger. But Conoco closed at $25.98 yesterday, up $1.68, stoked by investors' conviction that several larger concerns might also be interested in acquiring the company, The New York Times reported.Moreover, a counteroffer might well present less of an antitrust problem than the Phillips deal, the report said."Conoco taking no premium for this deal is like throwing blood in the water: it will raise the sharks," said Frederick Leuffer, a senior oil analyst with Bear, Stearns. "What would happen if another company offered a premium?"Analysts said possible contenders might include TotalFinaElf of France, BP Plc, Royal Dutch/Shell Group and ChevronTexaco Corp., the Times reported. Archie W. Dunham, Conoco's chairman and chief executive, flatly rejected the notion that the merger might not go ahead. "We're happily married and expect lots of children," he said, responding to a question about other suitors during a conference call with analysts yesterday.But both Conoco and Phillips considered the possibility of an interloper when they were negotiating their deal, executives close to the companies said. Each hired three investment banks as advisers -- an unusually large number in a friendly deal -- partly to keep potential rivals from being able to hire them to make a hostile bid, the executives said.The companies also agreed to require a $550 million breakup fee if one or the other backed out.The merger, if it is completed, would create the largest retailer of gasoline in the United States. The combined company, to be known as ConocoPhillips, would have its headquarters in Houston. Based on its reserves, it would become the third- largest oil company in the United States and the sixth biggest worldwide.