TotalFina has made a hostile bid for Elf Aquitaine, offering a 15 per cent premium in an attempt to form a French giant and the fourth-biggest oil group in the world - but Elf will fight to retain its independence.
The price of shares in Elf Aquitaine yesterday closed with a gain of 21.5 per cent to 177.30 euros and stock in TotalFina rose by 0.39 per cent to 128.50 euros.
The Elf main board rejected the bid immediately, describing it as hostile and as running against the interests of its shareholders.
More than half of Elf stock is believed to be held by foreign investors.
TotalFina is offering four shares for three, valuing Elf at €42 billion. The credit rating agency Standard and Poor's said that the new entity would have stronger finances than each of the two components.
TotalFina president Mr Thierry Desmarest expressed confidence that the French state would permit the takeover under the terms of a "golden share" it retained when Elf was privatised.
TotalFina and Elf would produce two million barrels of oil per day, would have annual sales of €67.232 billion, would be capitalised at about €93 billion euros and would employ 135,000 people.
This would place it fourth in the world after Exxon and Mobil, which are awaiting approval for a merger and which produce 4.2 million barrels of oil per day, BP Amoco and Arco, producing four million barrels, and Royal Dutch/Shell producing 3.7 million barrels.
TotalFina was created on June 14 with completion of a takeover by Total of France of Fina of Belgium. Elf President Philippe Jaffre had issued a message on Elf's inhouse television service promising that Elf "will defend itself".
The two groups had established strong links in the fields of exploration and production with countries in the Middle East.
The deal would yield savings of 400 million euros a year for three years to a total of 1.2 billion euro is annually from 2002. The effect on net earnings per share would be zero in 2000 but then earnings would rise by 4 percent in 2001 and by 8 per cent in 2002.
The offer represented a premium of 20 per cent on the price of Elf shares in the last few weeks and 15 per cent on the closing price on Friday.
