Total, Petrofina in another mega merger

The transaction will take place in two main steps. Total has agreed with a number of large Petrofina shareholders to buy a 41-per cent stake in exchange for new Total shares at an exchange basis of nine Total shares for two Petrofina, valuing Petrofina shares at 19,482 Belgian francs. Petrofina closed at 14,250 francs on Friday, it was suspended on Monday.

The companies selling shares are Electrafina, CNP, Tractebel, Electrabel and Fortis. After allapprovals, Total will make a buy out bid for the rest of the Belgian petrochemicals group at the same exchange terms.

Petrofina shareholders will get a gross dividend payment of 460 Belgian francs per share at the beginning of 1999.

Total said the merger should lead to an increase of some two billion French francs in operating income within three years. It said in a statement the transaction would be non-dilutive from 2000 forward and should contribute to an increase in earnings per share close to 10 per cent within three years.

With a combined market value of $38.8 billion, Total Fina overtakes Elf Aquitaine, number eight in the world with a value of $35.4 billion, and comes behind Italy’s ENI which rates $50.4 billion. It said the combined company would allow the new entity to capture substantial gains in exploration and production productivity, particularly in the North Sea, and to expand its positions in deep offshore waters in the United States and Angola.

In refining and marketing, the groupwill hold solid positions in Benelux, France, the United Kingdom, Germany, Spain and Italy. Joint management of the refineries and the marketing networks will yield substantial productivity gains. In northwest Europe, the combination of Total’s refineries with those of Petrofina in Antwerp and Feluy would allow the new group to more efficiently meet constraints imposed by new European fuel product specifications, Total said.

The headquarters for refining-marketing and for Petrochemical will be located in Brussels. Total’s executive chairman Thierry Desmarest will become chairman of the board, with Albert Frere and Jean Syrota named vice-chairmen. Francois Cornelis, chief executive of Petrofina, will become vice-chairman of Total Fina’s executive committee, to be chaired by Desmarest.