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Silly summer season speculation

Financial Times: European Comment: Not all that far-fetched: “Total’s cautious boss Thierry Desmarest has shown he can pull off big takeovers, with Elf and Petrofina. He has plenty of cash and more to come”

By Paul Betts

17 August 04

It may be silly summer season speculation. At least this is how the markets on Monday took revived talk of French oil champion Total bidding for Royal Dutch/Shell. But is it really so far-fetched?

The odds of Air France merging with KLM always looked slim. How could the French succeed where British Airways failed?

If anyone was to take over the Dutch airline, the British seemed best placed considering the once much-admired Anglo-Dutch business model long established by the likes of Unilever and Shell.

The French, however, confounded the sceptics. The new Franco-Dutch airline has just reported its first quarterly revenue figures, showing it is off to a flying start. The recent problems of Anglo-Dutch multinationals, not just Unilever and Shell but also steel group Corus, – suggest the model may be falling apart. Corus’s revival, incidentally, has been entrusted to a Frenchman. Time to replace the model with a Franco-Dutch alternative?

Total’s cautious boss Thierry Desmarest has shown he can pull off big takeovers, with Elf and Petrofina. He has plenty of cash and more to come when he disposes of his large Sanofi-Aventis stake.

Shell is finally considering changing the dual structure that has given it bullet-proof takeover protection, sheltering its now embattled management from the market’s ultimate sanction.

This could eventually provide Total with an opportunity. The French company is toying with buying into Russian oil. Shell, for all its troubles, would represent a safer prize, offering Total a big opening in America where it has trailed its peers. Not to mention the tax advantages of a Dutch registered company.

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