Rachel Reeves must be ready to protect BP from foreign raiders20 Feb 2025 10:07
BP is under siege from Elliott, arguably the world’s most feared activist hedge fund. So far, it’s a story largely confined to the business pages. But in this era of geopolitical complexity, it won’t stay that way.
This saga has a long way to run, and before long it will become a political story too. Government ministers should be getting ready to make some choices. Here’s why.
Elliott appears to believe that BP has gone badly wrong by investing heavily in low-carbon energy forms, from wind farms to electric-vehicle charging points, and in pivoting away from petroleum production – even making a steep reduction in oil and gas output an explicit strategic objective.
The return on capital is poor, Elliott seems to think. So poor as to amount to an abrogation of management’s responsibility to shareholders. In other words, its assault on BP directly contradicts the Government’s argument that pursuit of net zero is good for profits, investors, and economic growth.
Ministers aren’t compelled to pick up the gauntlet, but if they stay above the fray, the undecided will draw their own conclusions and critics will be emboldened – including Reform UK, which will seek to portray all this as the cautionary tale of an iconic British company brought low by the folly of embracing the net zero agenda.
On the other hand, in speaking up against the Elliott critique, the Government would risk provoking a reaction from the new American administration, which seems enthusiastic about a tilt back towards fossil fuel extraction and which may expect to see a US-headquartered firm given a clear run.
That’s the first political choice that ministers should be preparing to make. It might just be possible to duck it if Elliott remains BP’s only stalker. But there is a good chance now of a bidder emerging for the whole company. That would be the biggest test so far of the National Security and Investment Act of 2021, which enables ministers to block bids in this sector.
Believers in “securonomics” would surely seize that opportunity, and ministers certainly used to be among those believers. Are they still?
That’s the second looming political choice – one complicated by the fact that a takeover bid could well come from within a European Union country or a Gulf state. The latter is perhaps particularly likely.
After all, that’s where an awful lot of the money is these days, along with plenty of people with an interest in fossil fuel assets. Turning away bids from those quarters on grounds of national security would carry a diplomatic cost.
The United Arab Emirates, for example, is still smarting from last year’s decision to block Redbird IMI’s bid for the Telegraph – and that was part of a £600m deal. BP is worth £75bn.
Better, then, for the Government to refrain from using its blocking powers? Therein lies the third political choice. A takeover means the delisting of the sixth-biggest constituent of the FTSE100 –
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