Total buys PetroFina
01-12-98 French Total is buying Belgian refiner Petrofina for $ 11.8 bn in a deal that will create the world's sixth largest oil group.
The deal between Total and Petrofina, Belgium's biggest industrial company, will create a new company, Total Fina, that will be the third-largest oil company in Europe.
The acquisition of the Belgian company will mean Total overtakes rival Elf Aquitaine to become the largest oil company in France.
The new Total Fina group, to be headed by Total Chairman Thierry Desmarest, would have pro-forma 1997 sales of $ 52.96 bn, net income of $ 1.92 bn and a combined market value of $ 38.8 bn.
"There are a number of mergers now. It would be a danger to stay out of this process," Total chairman Thierry Desmarest said. "The move is part of a global change -- oil prices have practically been cut in half over the past year. All companies are seeking to survive in this new situation."
Total said the share swap would mean substantial cost savings in exploration and
production as well as in refining and marketing.
The deal is subject to shareholder approval and a green light from European and U.S. trade regulators. It was expected to be concluded in the second quarter of 1999 and will lead to stock listings in Paris, Brussels, London and New York.
The transaction will take place in two stages.
Total has agreed with a number of large PetroFina shareholders to buy a 41 % stake in exchange for new Total shares at a rate of 9 Total shares for 2 PetroFina.
The Belgian companies exchanging shares are Electrafina, CNP, Tractebel, Electrabel and Belgian-Dutch Fortis.
After regulatory and shareholder approval, Total will make a buy-out bid for the rest of the PetroFina shares on the same terms.
PetroFina shareholders will receive a gross dividend payment of 460 Belgian francs per share at the beginning of 1999.
The Belgian companies will have a combined holding of 12.4 % in the new combination.
Total said the merger should lead to an increase of
some 2 bn French francs in operating income within three years.
It said the combination would be non-dilutive from 2000 forward and should contribute to an increase in earnings per share close to 10 % within three years.
With a market value of $ 38.8 bn, Total Fina becomes France's largest oil company, overtaking Elf which was number eight in the world with a value of $ 35.4 bn, and moves into position behind Italy's ENI which is worth $ 50.4 bn.
Total said the deal would allow higher productivity in exploration and production, particularly in the North Sea, and to expand its positions in deep offshore waters in the United States and Angola.
The headquarters for refining-marketing and for petrochemicals will be in Brussels.
Francois Cornelis, chief executive of PetroFina, will become vice-chairman of the executive committee.
