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. Last Updated: 07/27/2016

Total Agrees to Acquire Petrofina




BRUSSELS, Belgium -- France's oil giant Total SA said Tuesday that it had agreed to take over Belgium's Petrofina SA to create the sixth-largest oil company in the world, seeking to cut costs in an increasingly competitive sector deflated by low crude prices.


The new company, known as Total Fina, will seek quotation at the Paris, Brussels, New York and London stock exchanges, a joint statement said.


"The move is part of global change, oil prices have practically been cut in half over the past year. All companies are seeking to survive in this new situation," Total chairman Thierry Desmarest said. "The business environment will be tougher than in the past years."


The agreement is based on a stock swap that provides nine Total shares for two Petrofina shares. When that transfer is completed, Total will control about 41 percent of Petrofina, Belgium's largest industrial company. It will bid for the rest of the Petrofina shares later.


The market capitalization of both companies combined stood at $39.9 billion.


The new group would employ 69,100 people. The companies said the employment totals would largely remain the same under the new company.


The Paris stock exchange was not immediately convinced and Total shares took a bighit, falling almost 10 percent in early trading Tuesday.


"When you add a sliding dollar and sluggish crude oil prices to the fact that investors have no details yet to gauge the benefits of the Petrofina takeover, you get a tumbling stock," a Paris trader said.


Petrofina's stock stood at 14,250 Belgian francs ($407.9) Friday before it was suspended for Monday's trading. The deal put the value at 19,482 francs ($557.7), a jump in value of more than a third.


"We have to recognize that the value today is higher than what we could get as a stand-alone company in the medium term," said Fran?ois Cornelis, head of Petrofina.


Petrofina stock has been gaining ground in recent days on rumors that the company was in talks with Italy's ENI SpA and France's Elf Aquitaine SA as well as Total.


"The combination of Total and Petrofina will allow the new entity to capture substantial productivity gains, particularly in the North Sea, and to expand its positions in the deep offshore (United States, Angola)," a joint statement said.


"In refining-marketing, Total Fina will hold solid positions" in the European Union. "Joint management of the refineries and the marketing networks should yield substantial productivity gains," the statement said.


A combined general meeting of shareholders has been called for Jan. 14 to approve the agreement. Total said a public offering on the remaining Petrofina shares will follow.


Petrofina, which employs 14,700 people worldwide, is one of Belgium's biggest industrial companies. It is best known for its refining and distribution operations in Europe and the United States.


Total SA employs 54,400, is the smaller of France's two oil companies, and has aggressively expanded its upstream business, mainly through exploration and especially in gas.