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Experts dump Total



Total rocked as $3bn knocked off combined market value, shareholders
defy Total
chairman

The following information on Total may give Free Burma readers perhaps a
better understanding of how and why Total rocked the
financial and business industry last week after their
PetroFina merger/takeover annoucment. 

Financial Times (UK) headlines on  Wednesday, December 2 featured 
photo articles on Thierry Desmarest, 
CEO Total in a special section titled "OIL:INDUSTRY IN FLUX. Exxon,
Total deals turn up peer pressure". 

Excepts of FT article, p 22 by Robert Corzine : 

"The herd mentality runs deep through the world's oil 
industry, so it was perhaps no surprise that two of the three merger/
takeovers to occur in the integrated petroleum sector in more than a
decade 
were announced on the same day.

"Although each of the companies involved in the wave of restructuing
seem so far -- BP Amoco, Exxon Mobil and Total Fina--
have been uniformly effusive about their prospects, the recent history
of the sector shows
that oil companies have also been consistenly 'more comfortable making
mistakes
with others', as one European oilman wryly noted this week."

"The fact that some analysts were yesterday questioning several aspects
of the
Total Fina deal -- especially because it takes Total, the lead company,
into areas such as
base chemicals and US refining and marketing which it had previously
rejected --
suggests it may grow harder for companies to find arguements about
industrial logicv at the end of 
the merger wave with which to impress shareholders."

"The merger wave may also divert the attention of executives in
companies that are 'not yet in the mood',
according to one executive. Elf Aquitaine, the other big French oil
group
that had been in the bidding for PetroFina, reminded key staff in the
wake
of the Total Fina deal that mergers were not the only way to develop the
business, and that
factors such as price and industrial fit would be decisive elements in
any of its
deals."

***
PETROFINA ALLIANCE WILL CREATE EUROPE'S THIRD-BIGGEST OIL COMPANY
Questions arise over cost, FT, by Neil Buckley in Brussels and David
Owen in Paris
(extracts)

"Total's takeover of PetroFina will create the world's sixth biggest oil
company,
and the third biggest in Europe with combined market capitalisation of
almost
$40bn.

"It will, in the words of thierry Desmarest,Total's chairman, create a
'new European
oil major' with combined sales last year of almost $54bn, 69,100
employees and 
reserves of 5.71 bn barrels of oil equivalent.

"But not everyone is rejoicing yesterday. Shares in Tiotal fell 12.3
percent from FFr705
to FF618 amqid fears it was paying too much for the Belgium company.
"Based on Total's closing share price Friday (Nov 27 sic), its nine for
two share swap offer valued PeetorFina
at BFr19,482 per cent, or, BFr456bn ($13.07bn) -- a 36.7 percent premium
to
Friday's closing price of BFr14,250.

"That was well above the analysts' estimates of BFr18,000 on Monday --
suggesting that
Total did indeed top a rival bid from Elf Aquitaine, its French
counterpart...(Total)
is understood to have been in advanced discussions with PetroFina's
shareholders
until late last week.

"Although Mr Desmarest insisted yesterday Total's entry had not been
'last-minute', it is thought to have begun serious talks with PetroFina
only when media
speculation around an Elf-PetroFina merger erupted in mid-November.

"Mr Desmarest insisted the deal was good for shareholders, with a
positive impact
non cash flow per share from next year, and on earnings per share from
2001."
"The offer will then be extended to all PetroFina sharedholders. The new 
group, Total Fina, will be quoted on the Paris, Brussels, London and New
York
stock exchanges."

"Mr. (Albert) Frere, who will hold almost 9 percent of the enlarged
group, will become
co-vice chairman to Mr Desmarest. Francois Cornelis, PetroFina chief
executive,
will be deputy chief executive of the new group.
"PetroFina was advised by JP Morgan with Paribas, and Total by Credit
Suisse First
Boston."

**
Dec 2 1998
Oil prices slip on PetroFina takover news
MARKET REPORTS
By Paul Simon (FT) p 30 

World curde prices slipped again as the oil industry digested the
implications
of Total's bid for PetroFina. 

The benchmark crude contract fell to $10.16 a barrel on London's
International Petroleum Exchange at one state, less than half its level
just
a year ago."
***

Dec 2 1998 (stocks)
Total bid sends Pais lower
EUROPE 
"A severe shakeout for oil giant Total plus a further round of 
widespread profit-taking sent PARIS steeply lower and left the CAC-40
INDEX OFF 155.0 at 3,688.34 for a two-session setback of 6.5 percent.

"Total crashed 12.3 percent in heavy volume after the group confirmed
that it was taking a 41 percent stake in 
PetroFina and planned to put in a bid for the rest of the Belgium oil
leader.

"With analysts arguing that Total was effectively paying too high a
price,
and amid concern the dal would not be earnings postive until 2001, the
shares ended off FF 618 in tunover of 
FFr3.1bn.

"In Brussels, though, Petorfina showed a dazzling turn of speed in an 
otherwise severely depleted market. It surged BFr2,625 or 18.4percent
to BFr 16,875 in solid volumns."

***
Thursday, Dec 3 1998
Oil drifts lower after early gains (Paul Solman, FT)
JP Morgan is forecasting that oil demand will rise by barely 
1 percent in 1998 and 1.6 percent in 1999, down from an average of 2
percent
between 1994 and 1997."

**
Thursday, Dec 3 1998
Total chairman may need to pour oil on troubled waters/ Desmarest could
face rocky response to merger from financiers, writes Robert Corzine

"Thierry Desmarest, Total chairman, was his usual enthusiastic self when
he arrived in London yesterday to promote his takeover*
of PetroFina of Belgium. but Total's road show to sell the deal to key
world financial centres looks set to be a 
rocky one, with shareholders uncertain how to interpret this week's
events.

The charitable view is that Mr Desmarest may be in danger of scoring an
own goal in taking over
PetroFina. After all, investors and analysts alike on both sides of the
Atlantic Ocean had embraced the 
company in its current guise.

"Although Total is a 'mini-major' when compared with the giants of the
international integrated oil
sector, in recent years it has displayed a commercial savviness and
nimbleness which pleased investors.
"The fact tht it was one of the few European oil companies to attract a
sizeable US following was evidence that its strategy --
to take on the biffest companies in the industry in competing for large,
low cost reserves while carefully controlling its involvement
in capital intensive but generally low margin areas such as refining and
bulk petrochemicals -- had struck a resonancve among a wide
range of investors.

"The sceptical market reaction to the deal suggests there is a real
worry that the PetroFina deal contradicts the 
stated strategy by taking Total much more deeply into refining and
marketing, while adding a bulk petrochemicals
dimension to its business.

"They thoght they were buying an apple and it now turns out to be an
orange,' is how one person familiar
with the deal summed up the sceptical market reaction. 'but investors
have to evaluate the orange relative
to the other oranges out there.'"

**

The LEX Column, FT Dec 3 1998 (FT backpage)
Oil Synergies

Why do investor's reactions big oil's big mergers seem so contrary?
 ...Total/PetroFina's
promise of ameasly $350 saving has been givben the thumbs down
altogether, with
over $3bn knocked off their combined market value."...Total/Petrofina,
which appears
laregly motivated by the desire to get bigger than French rival Elf,
whategver the consequences for its highly rated paper. Not
only has Total failed to explain where its savings lie but it is unclear
whether it can realise them at all." National sensitivities about the
fate of former state oil comapnies in Europe
may be softening, but political obstacles to serious restructuring are
not fgalling at the same
pace. Instead of putting onmuscles in Brussels, Total is thickening out
with
expensive flab."

typed by dawn star/EuroBurmaNet
Worldwide Total Boycott/<www.euroburma.com>