By Dmitry Zhdannikov and William James
LONDON, April 27 (Reuters) - Britain's warning to potentialsuitors of BP is a sign of the oil major's vulnerabilityto a takeover bid and that a more politically palatable tie-upwith Royal Dutch Shell no longer seems to be an option,banking and industry sources said.
Despite championing a laissez-faire policy towards takeoverdeals, Britain has always had a special interest in BP, datingback to the creation of the company via an unusual governmentinvestment master-minded by Winston Churchill.
But in the past when the company has looked vulnerable,there was always the prospect that Anglo-British peer Shellcould act as a "white knight" and agree to a merger deal thatwould preserve British interests.
With Shell now tied up with a $70 billion takeover of BG, that seems much less likely, prompting the outgoingBritish government to break cover and say it would oppose anybid for BP.
"Everyone is thinking that Shell is probably out of the ...game for a while. So inevitably, it makes BP more vulnerable asyou don't have Shell as a white knight anymore," said a top oilinvestment banker on condition of anonymity.
Industry sources say the government's stance is more thanjust political posturing, with opinion polls deadlocked ahead ofa May 7 election.
Rather, it is a response to speculation that Shell's movefor BG could be the start of a wave of industry consolidationsimilar to the one at the end of the 1990s -- during another oilprice decline.
Rumours of bids for BP from U.S. rivals ExxonMobil and Chevron, as well as Shell, have moved the company'sstock at least three times over the past year.
FLEXING MUSCLES
Five years ago, Shell did work on a rescue bid, when BP wasstruggling to plug oil gushing from its Macondo well in the U.S.Gulf. BP was going through a leadership crisis; a weak pounddragged the dollar value of the firm down to as low as $80billion; and the price of credit default swaps on BP bondsshowed that even its solvency was in question.
"It wasn't so much that we wanted to buy, more we thoughtthe British government might ask us to step in," PeterVoser, Shell's chief executive at the time, told Reuters in2013.
BP, formerly British Petroleum, is still struggling withU.S. spill liabilities and is weakened by its huge exposure toRussia, though its finances are much stronger than five yearsago and its market value is 60 percent higher at $131 billion.
"I think any government will be very serious about notallowing BP to be bought," said another major investment banker.
But with its open-door policy on takeovers, Britain on paperhas little power to prevent a bid for BP.
"The UK has no real legislation in place to allow thegovernment to invoke some legal basis to prohibit a takeover," a London-based legal adviser to the oil industry said.
"The government has very little formal power to block a bid.The decision is for the shareholders of BP and for the board torecommend what is good for the company," he added.
Still, London has flexed its muscles in recent months.
Earlier in April, it ordered Russian oligarch MikhailFridman to sell his North Sea assets -- its first such order inthe sector.
Last year, many politicians also expressed opposition toU.S. drugmaker Pfizer's bid for Anglo-Dutch rivalAstraZeneca, though the deal fell apart before thestrength of their feeling could be put to the test.
Ed Miliband, leader of the main opposition Labour party,wrote to Prime Minister David Cameron a year ago saying he wasconcerned about the bid and shared a commitment to the UKretaining its leading global role in pharmaceuticals business.
On Monday, Miliband said he had not seen the BP reports, butadded: "You know that we've set out quite clearly our attitudeto these issues which is we do need to take particular careabout strategically important companies and what happens tothem." (Additional reporting by Ron Bousso; Editing by Sue Thomas andMark Potter)