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TotalFina eyes Conoco
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January 14, 2002: 7:28 a.m. ET
Analysts: French energy giant may bid to scuttle Conoco-Phillips merger
CNN's Gordon Isfeld
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LONDON (CNN) - French energy group TotalFinaElf could bid for U.S. rival Conoco in an effort to scuttle its $35-billion merger with Phillips Petroleum.
TotalFinaElf, the world's fourth-largest oil and gas group, is anxious to expand its global operations and break into the lucrative U.S. market, analysts say.
"It's an interesting fit but the financing would be a little complicated," J.J. Traynor, an oil and gas analyst at Deutsche Bank, told CNN, adding that there's about a 40-percent chance of such as deal going through.
Britain's Sunday Telegraph newspaper said TotalFinaElf was considering a bid for Conoco to wreck the planned tie-up with Phillips. Conoco is seen as an ideal partner for TotalFinaElf, because of its strong market position in the U.S. and the company's interests in Venezuela and Asia.
TotalFinaElf has declined to comment on a possible takeover bid.
Traynor said any deal would have to be in cash, as stocks in the French company would not be acceptable to U.S. shareholders. That would mean TotoalFinaElf would have to sell some of its assets to fund the deal.
In addition, the group would face a $550 million break fee that Conoco (COC: up $0.39 to $27.96, Research, Estimates) and Phillips (P: up $0.05 to $59.25, Research, Estimates) have written into their merger agreement.
Where the two companies operations overlap, analysts say, a takeover would provide enormous cost savings to TotalFinaElf.
With weak oil prices and fewer new drilling projects, major energy companies have been looking to consolidate and cut costs.
The Conoco-Phillips merger, announced in November, would create the world's six largest energy company and the third biggest oil and gas operator in the U.S. The new company would be called ConocoPhillips.
TotalFinaElf already has operations in more than 100 countries. The group is involved in both exploration and production, refining and marketing, as well as trading in crude and refined products.
The group was formed by the acquisition by Total of Belgium's Petrofina in 1999 and the subsequent merger with Elf. Since then, analysts have been expecting the company to continue on the acquisition trail.
Before merging with Total, Elf had approached Conoco about a possible merger.
The Telegraph said Conoco's shareholders, who will vote on the merger in the next few months, are becoming increasingly concerned that Phillips would benefit more from the deal than Conoco.
"The general belief is that Phillips has got by far the best of the merger," the U.K. newspaper quoted one banker as saying. "All Conoco gets is to put its name first and gets to keep the headquarters in Houston."
Meanwhile, the paper said another major oil company, Chevron, may also attempt to break up the merger with a bid of its own for Conoco.
If TotalFinaElf does not make a bid for Conoco or is beaten out by another bidder, analysts say the only other U.S. target on Conoco's scale would be Unocal, a California-based oil and natural gas producer. In Canada, the French group has been rumoured to be interested in Husky Energy Inc.
TotalFinaElf's shares fell 2.6 percent to  152.70 in early trading Paris on Monday. Over the last 12 months the stock has risen about 1 percent. 
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