Shell in $1.5bn Exxon link-up

Shell yesterday announced a link-up with Exxon to create one of the world's largest oil additives businesses with revenues of around $1.5bn (pounds 970m). The two giant oil groups will command nearly a quarter of the market for additives, put at over $6bn in 1995.

Hopes that the announcement heralded a move to unlock shareholder value by demerging the chemicals division sent Shell's shares up 18.5p at one stage in morning trading. However, the shares ended just 5.5p up at 943p as disenchantment set in once analysts scrutinised the deal. John Toalster of brokers Societe Generale Strauss Turnbull said: "It's a bit of a storm in a tea cup.... It represents around 5 per cent of turnover, but it is not going to be earth shattering as far as Shell is concerned."

Additives are used in petrol and lubricants to make engines run more smoothly and more cleanly. Shell said the joint venture would combine the capabilities of each partner and provide "significant" enhancements in efficiencies in research and development, technical services, marketing and distribution. The move was prompted in part by sluggish demand for lubricants and fuels, which is falling below economic growth rates, the oil group said.

It has signed a non-binding letter of intent with Exxon to form the joint venture, which will be controlled on a 50:50 basis by the two companies. Exxon Chemicals will contribute its Paramins division to the operation, while Shell International Chemicals will add its world-wide petroleum additives business. It is due to start operating next year, assuming it receives regulatory clearance.

The Exxon business employs 1,600 people in 13 countries, ranging from the Americas and continental Europe to the Middle and Far East, while Shell has 400, although that excludes workers at manufacturing sites in the UK, France, Belgium and the US. A spokesman for Shell said many of the factories were joint operations which could not be separated. He could give no commitment on whether or not there would be redundancies as a result.