The Independent (UK): Outlook: Surely not, Shell: “…one of the more fiendish rumours to have been circulating in the markets of late is that Royal Dutch/Shell and Total of France are contemplating a giant oil merger.”: “A combination of Total and Shell would be in a different league again, creating a business worth pounds 180bn and unseating Exxon-Mobil as the world's biggest oil company.”: “Shell is braced for seismic change enough as it gets ready to ditch 100 years of tradition along with its dual board and twin-listing and embrace the Anglo-Saxon model. Could it really handle an infusion of Gallic blood so soon after?”: “…don't underestimate French ambition…” (ShellNews.net) 28 Jan 05
MICHAEL HARRISON
Jan 28, 2005
THE DEVIL makes work for idle dealers and one of the more fiendish rumours to have been circulating in the markets of late is that Royal Dutch/Shell and Total of France are contemplating a giant oil merger. The idea was first floated in a research note from Exane BNP Paribas last autumn and it surfaced again a week ago.
It sounds far-fetched and it probably is. But then who would have thought five years ago that BP would be the size it is today thanks to two daring and exquisitely timed takeovers which have transformed it into Britain's most valuable company?
A combination of Total and Shell would be in a different league again, creating a business worth pounds 180bn and unseating Exxon-Mobil as the world's biggest oil company. BNP calculated that there would be a further 20 per cent upside for Shell and Total shareholders on top of that.
Total is no stranger to corporate action itself, having picked off PetraFina and Elf Aquitaine in quick succession as the oil industry underwent its last big consolidation phase. The BNP boys reckon, however, that any deal with Shell would have to be structured as a takeover of Total, and, alas, that's really where the problems begin. BP struck when the oil price was at an historic low and swept up Amoco and Atlantic Richfield for a song. It cannot have escaped BNP's notice that the oil price today is gushing towards $50 a barrel, which would make Total a very expensive prize to digest for anyone.
Then there is the small matter of the disposals Total and Shell would have to volunteer to keep the regulators onside. Two-thirds of Total's business is tied up in downstream operations such as petrol stations. There would need to be a firesale of its forecourts to make any deal palatable to the competition authorities.
Finally, and not least, how on earth would an Englishman, a Dutchman and a Frenchman get on together under one roof? Language might not be a problem but culture certainly would. Shell is braced for seismic change enough as it gets ready to ditch 100 years of tradition along with its dual board and twin-listing and embrace the Anglo-Saxon model. Could it really handle an infusion of Gallic blood so soon after? Not to mention the baggage of past corruption scandals that Total brings?
It surely couldn't happen but if it did, the French President Jacques Chirac would welcome it for one. Indeed, when he spoke of Europe creating a new breed of industrial champions a fortnight ago in Toulouse, energy was high on his wish-list. A co-incidence? Probably, but don't underestimate French ambition.