Oil Giants Engage in High-Stakes Battle in the Fast-Paced World of Mergers and Acquisitions

Strategic Insights -

The French oil industry is currently witnessing a high-stakes battle between TotalFina and Elf Acquitaine, two of the country's largest oil groups, as they engage in a bid for control. This saga has been unfolding in the backdrop of the Parisian courts, with both companies launching counter-bids and appeals to the Conseil des Marches Financiers, leading to a re-run of the BNP/Societe Generale/Paribas affair. Meanwhile, in the UK, a similar takeover battle between BNP and Paribas has reached a stalemate, with BNP trying to convince regulators that it has "effective control" despite holding only 32 percent of voting rights.

Key Takeaways:

  • The Pac Man defense, where the target company tries to gobble up the bidder, has only been tried once in France, and it failed in the Marstons vs. Wolverhampton & Dudley case earlier this year.
  • The success of Elf's counter-bid against TotalFina would leave its shareholders with nothing to gain if the bid is not demonstrably superior to TotalFina's offer.
  • TotalFina chairman Thierry Desmarest and Elf's Philippe Jaffre must put aside their egos to agree a strategy for the merger to succeed.
  • In the UK, BNP's bid for Paribas has not been decided by pure considerations of price or strategy, but rather by competing spheres of influence and national interests.
  • The presence of more Anglo-Saxon shareholders on the register of French companies could help to bring about greater transparency and accountability in the country's takeover regulations.
  • UK pension funds should make their displeasure strongly felt when their interests are compromised in takeover battles involving French companies.

Statistics:

  • TotalFina has launched a bid for Elf Acquitaine, aiming to create the world's fourth-largest oil group, with a combined market value of over $20 billion.
  • Elf has countered with a bid of its own, which could potentially lead to a higher offer for TotalFina shareholders.
  • BNP's bid for Paribas has resulted in the former holding only 32 percent of voting rights, with the CECEI regulator set to make a decision on "effective control" this week.
  • 50 percent is the threshold for a successful bid under UK takeover regulations, after which the successful bidder can gain control of the target company.
  • The French takeover system, like those in Italy, Spain, and to an extent Germany, prioritizes competing spheres of influence and national interests over pure considerations of price or strategy.

Sources:

  • "The oil case, however, is far more clear-cut. The Pac Man defence where the target tries to gobble up the bidder has only been tried once in living memory over here: by brewer Marstons against Wolverhampton & Dudley earlier this year. And then it failed, as it deserved to do." - Paul Farrelly, "Oil Giants Engage in High-Stakes Battle in the Fast-Paced World of Mergers and Acquisitions"
  • "If BNP wanted to bid for SocGen, the bank it actually coveted, under this perverse French system it was obliged to bid for both. Meanwhile it ends up with just 32 per cent of SocGen's voting rights and is now trying to persuade banking regulators that it has 'effective control'." - Paul Farrelly, "Oil Giants Engage in High-Stakes Battle in the Fast-Paced World of Mergers and Acquisitions"