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TOTALFINA's Hostile takeover Elf/In
Subject: TOTALFINA's Hostile takeover Elf/International Herald Tribune
(english)
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this takeover bid is definitely going to have implications for Burma as
French state backs TOTALFINA's bigger is better current stand.
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Paris, Wednesday, July 7, 1999
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Compiled by Our Staff From Dispatches
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PARIS - Just three years after he became the chief
executive of Total SA, he made it France's largest oil
company, overtaking the longtime leader, Elf Aquitaine
SA, through the $11.6 billion takeover of Petrofina SA
of Belgium that created Total Fina SA.
On Monday, three weeks after acquiring Petrofina, he
unveiled a $48.6 billion hostile all-stock offer to buy
Elf, which would create the world's third-largest
publicly traded oil company in terms of sales, behind
Exxon Corp. and Royal Dutch/Shell Group.
''The idea of Elf and Total merging has been discussed
in France for 10 years,'' said Elie Cohen, head of
research at France's National Center for Scientific
Research, ''but until recently with the presumption
that it would be Elf absorbing Total.''
''Desmarest has moved with dazzling speed to make Total
France's leading oil company,'' he said.
Elf rejected the offer, which analysts and oil company
executives said would not deter Mr. Desmarest.
''He comes across as a well-bred gentleman, but he is a
tough and ambitious fellow,'' said Marcel Mizrahi, a
former executive at Mobil Corp. and now an oil
consultant at Wargny, a Paris brokerage. ''This is
going to become a battle of egos.''
On Tuesday, Finance Minister Dominique Strauss-Kahn
said the French government would not use its ''golden
share'' to veto Total's bid for Elf. He said he favored
the Total offer because it would protect the companies
from a U.S. 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,'' Mr. Strauss-Kahn
said on RTL radio.
The idea of the ''golden share'' was initiated in 1993,
Mr. Strauss-Kahn said, to enable the government to
block mergers that threatened state security.
Shares in both companies rose Tuesday, with Elf closing
at Û180.90 ($185.10), up Û3.60, after rising more than
21 percent on Monday. Total finished at Û134.50, up
Û6.00. It was at Û128 when it made its unsolicited
approach.
Mr. Desmarest, 53, is used to taking risks. In November
1997 he signed two exploration agreements with Iran,
correctly gambling that the United States would not
risk a trade war with France by enforcing its sanctions
against the Middle Eastern country.
Unlike Elf's CEO, Philippe Jaffre, 54, who went into
the job straight from the government bureaucracy and a
state-run bank, Mr. Desmarest is an engineer by
training. He began his Total career in the exploration
and development division, traveling the globe to
negotiate drilling rights.
Oil executives who know him say he is also
self-assured. He was so confident of his impending
offer for Elf that he accompanied Prime Minister Lionel
Jospin on an official visit to Russia last week.
His investment-banking advisers said they had rarely
seen an executive go on a foreign trip like that days
before announcing the takeover of a lifetime.
Mr. Desmarest serendipitously found himself last week
on a plane with Mr. Jospin and Mr. Strauss-Kahn as they
headed for Moscow. The trip, which had been planned
before the Total Fina bid was announced, gave him a
golden opportunity to test the waters with the
authorities, banking sources said.
At a news conference Monday to announce the operation,
Mr. Desmarest joked that he ''wasn't very successful''
in persuading Mr. Jaffre of the deal's merits. He said
he had been rebuffed in several recent meetings.
Analysts expect a bruising battle between the two men,
both of whom think they should run France's largest oil
company. They also graduated from rival elite
universities, and their skyscraper offices face each
other 600 meters apart across the esplanade of a modern
office complex just outside Paris.
Total Fina is offering four of its shares for three in
Elf, valuing its smaller French rival at Û170.70 a
share, a 17 percent premium to Friday's closing price.
The purchase extends consolidation in the oil industry
after British Petroleum PLC's acquisition of Amoco
Corp. and Exxon Corp.'s purchase of Mobil Corp.
One investment banking source said Total had launched a
hostile bid because Mr. Jaffre had consistently
rebuffed Mr. Desmarest's suggestions of a friendly
merger. ''I tried to call him this morning,'' Mr.
Desmarest said shortly after unveiling the bid. ''I got
his answering machine. I left a message, and I was told
the message had been received.''
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