TotalFina, France''s largest
oil company, has initiated a euro 42 billion ($42.97 billion)
stock bid for its French rival Elf Aquitaine by offering
four of its own shares for three in Elf. In an immediate
response, Elf issued a statement branding the bid as "hostile"
and "not in the best interest of shareholders".
TotalFina''s 4:3 offer, at the 2 July
closing share price of euro 128 for TotalFina and euro 145.9 for Elf, works out to a bid
value of euro 170.7 per share, reflecting a premium of 17 per cent. TotalFina''s offer,
however, is more modest at 15 per cent.
TotalFina chairman Thierry Desmarest said
in a statement the project was driven by the "exceptional strategic fit" of the
two groups. "I believe that it is necessary today to join forces to assure continued
solid growth and to take our place as an oil major of the first rank at a time when the
industry is restructuring on a global scale," he said.
salvo in a protracted battle to come came from Philippe
Jaffre, chairman of Elf Ataiquitaine, who declared, "TotalFina''s
bid will fail." In a strongly worded and emotional
address to senior executives at Elf''s La Defense headquarters,
he said TotalFina was approaching Elf to "do its
shopping and to look for what it lacks". He described
TotalFina''s all-share offer as "over-simplified",
"vague" and "very much aimed at the financial
Meanwhile, in a significant development,
French finance minister Dominique Strauss-Kahn said he favoured TotalFina''s hostile
takeover bid because it would protect the companies from a US or British acquisition.
"I think it is a good thing if a French group is nearly on the same level with the
world''s three biggest oil groups and, therefore, protected from a takeover by an
Anglo-Saxon or American company," he said. The French government holds one share in
Elf, termed as a "golden share", which grants it veto power.
Though the Elf chairman gave no precise
indication of how the company would react to TotalFina''s offer, he said the bid would
accelerate the implementation of Elf''s own strategic plans. This would involve "a
major project in which Elf and its employees will be masters of their own destiny",
Markets speculation on how Elf may thwart
TotalFina''s offer is based on the possibility of Elf acquiring a small energy group to
increase TotalFina''s offer or negotiating a friendly deal with TotalFina, finding a white
knight and attempting a counter-bid.
Analysts discount the possibility of the second option, as
the French government is
keen on an all-French deal. Moreover, Elf ''s recent failure to buy Norway''s Saga Petroleum
in the face of Norwegian opposition will serve as a timely reminder of the dangers of
taking on the role of white knight, they say.