Shell and Texaco abandon alliance
Tuesday 01 December 1998
The decision by Shell and Texaco to scrap their joint venture in manufacturing and marketing of oil products prompted speculation that the two groups could be lining up full merger partners following the BP-Amoco deal and the impending Exxon-Mobil merger.
Shell would have had an 88 per cent stake in the venture with Texaco, which was announced in September, and would have covered both refining and petrol retailing throughout Europe.
The merger would have created a business with 16,000 petrol stations - including more than 1,500 in Britain - 19 refineries and 16 lubrication plants.
In a statement, the two companies said they had ended talks on forming an alliance after deciding it would not maximise shareholder value.
A Shell spokesman added that several areas of concern had been identified on the part of both companies but he declined to elaborate on what these were.
Shell said that the failure of the Texaco alliance would not affect its own European rationalisation programme, which will result in 3,000 job losses and the closure of four headquarters offices - including Shell Mex House in London. Nor would it affect Shell's existing venture with Texaco in the United States.
Industry analysts said the decision was disappointing and shares in Shell fell back after the news. "It paints a picture of inertia. This is something which they billed as an important, positive development and they've failed to deliver it," said Jeremy Elden of Commerzbank.
Meanwhile, shares in both Total and Elf made strong gains on the Paris bourse amid speculation that they were poised for a tie-up with Petrofina. Total was up 3.5 per cent and Elf 1.5 per cent.
The rise followed a report in Belgium saying that the financier Albert Frere was close to selling his 30 per cent stake in the Belgian oil group following weekend negotiations with Elf and Total.
Shares in Petrofina were suspended pending a statement. Total is due to issue a statement this morning following a meeting of its supervisory board yesterday evening.
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