The French-Belgian oil company Totalfina launched a hostile, $43 billion takeover drive today for France's other oil giant, Elf Aquitaine, in what would create the world's fourth-largest oil company.
It was the latest in a wave of consolidations and proposed mergers in the oil industry and reflected a move toward hostile takeovers in formerly staid corporate Europe.
Elf said the offer was not "in the best interests of its shareholders." The purchase would be made through a share exchange.
The offer comes just two weeks after Total SA, the French arm of Totalfina, finished its purchase of 41 percent of the Belgian firm Petrofina. And it follows two giant oil merger deals, the pending combination of Exxon Corp. and Mobil Corp. and the union of British Petroleum PLC and Amoco Corp., which then bought Atlantic Richfield Co.
With oil prices rising from their historic lows and the new, larger oil firms becoming more efficient, the profits to be earned in the oil industry will be made by the giants, analysts said. Totalfina is hoping to become one of them. "I think Total wants to join the super-league, and if this works, they will," said Philippe Cantelaube, analyst with Credit Lyonnais Securities in Paris.
Experts cautioned that the game is not over, however. The French government, which holds a "golden share" of Elf, would have to bless the transaction. Such approval is considered likely: The government tends to prefer combinations between French companies over international mergers, and Totalfina Chairman Thierry Desmarest traveled to Moscow with French Prime Minister Lionel Jospin on an official visit just last week.
Agence France-Presse reported that Desmarest said at a news conference today that "the public authorities are aware of the industrial interest of this project. . . . I have every reason to be optimistic."
The Finance Ministry had no comment today. "What foreigner could go up against that golden share?" asked one Paris analyst.
Others believe Elf could become the object of a bidding war, either by design or because other merger partners are attracted by its integrated exploration, production, distribution and retail networks in Europe. Most likely to be interested: unmarried oil companies Chevron Corp., Shell Oil Co. and the Italian ENI SpA.
As the drama unfolds, the price is likely to rise. Lucy Haskins, senior analyst for Commerzbank in London, pointed out that the share exchange Totalfina is proposing -- four of its shares for three Elf shares -- values Elf at only 16 percent above its Friday market closing.
"We think Total will win out, but at a higher price," she said. Others suggested Totalfina might have to sweeten the deal with cash.
Elf and Total are both formerly state-owned companies; in the past they sometimes acted as conduits for the French government's interests in Africa and elsewhere. Both are now entirely private.
Analysts have questioned whether two companies from France, a country known for its restrictions on shedding employees, could achieve the kind of cost savings needed in the oil industry.
France also has a reputation for labor troubles, and Elf is not exempt: The company has been without e-mail for three months because of a strike by computer technicians over job cuts.