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Shell might just be too big for Total to swallow

Business Report: ‘Shell might just be too big for Total to swallow’

“In Paris and London, oil analysts deemed a hostile takeover bid possible but…”

August 18, 2004

By Delphine Toitou

Paris – Amid speculation French oil group Total could attempt a hostile takeover of rival Royal Dutch/Shell, remarks by a top Total executive and market analysts suggest the time is not right for such a move.

Total declined to respond directly to what it called market rumours, but a group spokesperson referred to comments by financial director Robert Castaigne on August 5, when he said periods of high oil prices were not opportune for major acquisitions.

The spokesperson said on Monday: “A company like Total doesn’t change its strategy in the space of 10 days.”

In Paris and London, oil analysts deemed a hostile takeover bid possible as Total was in good shape financially, but said Shell’s complex corporate structure, competition questions and financial factors weighed against it.

“The arbitrage problems would be enormous and the sector of groups quoted on two different market places is extremely complicated,” said Irene Himona of Morgan Stanley.

Shell, the fourth-biggest oil group, has a two-part structure between The Netherlands and Britain.

Royal Dutch is quoted in Amsterdam, holds 60 percent and has a market capitalisation of e83.7 billion (R682 billion).

The rest is owned by Shell Transport, quoted in London with a value of £38 billion (R462 billion).

Dresdner Kleinwort Wasserstein said Shell “is probably too big to swallow”.

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