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French oil rivals lock horns
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July 19, 1999: 3:49 p.m. ET
Elf Aquitaine uses 'Pac-Man defense' with $51B counter bid for TotalFina
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LONDON (CNNfn) - French oil giant Elf Aquitaine launched a $51.05 billion counter bid Monday for TotalFina to fend off the hostile takeover offer from its larger French rival. The move is the latest in a series of hotly contested takeover battles that are transforming French boardrooms.
Elf's defense follows the surprise 42 billion euro ($42.6 billion) all-stock offer launched by TotalFina on July 5 in a bid to create the world's fourth-largest oil firm. Elf earlier had rebuffed TotalFina in informal merger talks.
Elf had flirted with the idea of securing a white knight or buying another oil firm to put it out of TotalFina's reach, but its so-called "Pac-Man" strategy -- turning on the hostile bidder -- involves splitting the merged entity into separate energy and chemicals businesses.
TotalFina said it will press ahead with its own offer, which already has regulatory clearance.
The privatization of France's largest companies and the pressures of globalization have seen the French corporate rule book torn up in recent months. A series of multi-billion dollar deals in the banking and luxury goods sectors have proven to be beyond the reach of state officials long used to dictating the fate of planned transactions.
Banking also a battlefield
The French government -- which initially supported TotalFina's bid for Elf -- already has given up attempts to resolve an acrimonious takeover battle among three of the country's largest banks. Banque National de Paris (PBNP) is trying to scuttle an agreed-on $17.3 billion merger between Societe Generale (PGLE) and Paribas (PLM) by taking over both rivals.
The tussle has dragged on since February and shareholders are due to vote on the competing offers at the end of the month.
In May, French luxury goods maker LVMH (PMC) finally admitted defeat in its hostile bid for the Italian fashion house Gucci after a bitter four-month battle ended in court. Gucci had turned to French retail giant Pinault Printemps-Redoubt as a white knight, selling it a 40 percent stake to block LVMH's advances.
Oil under pressure
The scale of the Elf-TotalFina offer and the pressure for consolidation in the global oil industry threatens to make this battle every bit as heated.
Elf is offering three of its own shares and 190 euros cash for every five TotalFina shares, a 10 percent premium on TotalFina's Friday close. The deal, if approved, would still create the world's fourth-largest oil and gas company and the fifth-largest chemical concern.
Elf said its offer "combines a stronger industrial vision with a better value package for both sets of shareholders." But analysts said the large cash element created a delicate balance between the expected synergies and the price being offered.
"We are very sensitive to the 13.5 billion euro cash component," said Emmanuel Dubois-Pelarin, industry analyst at Standard & Poor's in Paris. "Investors should be much more cautious" about the Elf bid.
Elf (PAQ) shares dipped 1.4 percent to close at 173.50 euros Monday. TotalFina (PFP) added 1.15 percent to end the day at 131.80 euros.
Elf claimed its plan would generate annual pretax savings of 2.5 billion euros within three years of completion, more than double the 1.2 billion euro total synergies claimed by TotalFina for its offer.
Elf plans to recommend the bid for approval at a special shareholders' meeting, whose date is yet to be determined.
Elf said its proposal would lead to 6,000 jobs cuts, including 2,000 in France, compared with the 4,000 job cuts expected from TotalFina's plan.
Elf also intends to dispose of 15 percent of its 35 percent stake in the French pharmaceutical group Sanofi-Synthélabo (PSQ), created from the recent $10 billion merger of Sanofi and Synthélabo. Dubois-Pelarin said that this could generate around 7.75 billion euros.
Elf Chairman Philippe Jaffre, who said last week that TotalFina would never succeed, defended the claimed synergies of the Elf proposal.. "We believe that TotalFina's unwelcome offer both undervalues the contribution of the Elf shareholders to the combination and misses the opportunity to create a new industrial project," he said in a statement.
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Elf Aquitaine
TotalFina
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