TotalFina said it launched the unsolicited offer after Elf had repeatedly rebuffed its friendly overtures. It said the deal would benefit shareholders, customers and employees of both companies as it would create a company that could compete on the global market. Thierry Desmarest, TotalFina chairman, said a merger "would produce strong earnings growth of at least 20 per cent a year, assuming a constant environment, over the coming years."
But Elf said the TotalFina offer was not in its shareholders' best interests, pointing out that the value of Elf shares had doubled over the last three years. "This offer has not been the subject of any study or discussions with Elf's management and is therefore considered as being hostile," the company said.
Analysts said it expected foreign rivals such as Shell or BP of the UK or Exxon or Chevron of the US to make rival bids. Neither Shell nor BP would comment. The bid values Elf shares at euro170.7 compared with its closing price of Friday of euro145.9 - a 17 per cent premium - although analysts are looking for rival bids at up to euro200. But the outcome will depend on the attitude of the French government, which retained a golden share in Elf after the company was privatised in 1994. It could use the stake to block a foreign takeover.
Shares in oil stocks surged on the news, which could herald a repeat of the series of mergers caused by the oil price slump in the two years to 1998. Oil prices rose to an 18-month high yesterday on reports that OPEC supply limits have eaten into stockpiles in the West. Brent crude rose $0.51 to pounds 18.17 a barrel.
News analysis, page 19