Offer by Elf Aquitaine
TOTALFINA S.A.
19 July 1999
ELF AQUITAINE ANNOUNCES CASH AND SHARE OFFER FOR TOTALFINA
A New Industrial Project Creating Two Separate Groups:
*the world's 4th largest oil and gas group and
* the world's 5th largest chemicals group
Paris, July 19, 1999 - The Board of Directors of Elf Aquitaine decided late
yesterday evening to submit an offer for TotalFina including:
*New industrial project creating two completely separate pure play oil and
gas and chemicals groups as soon as practicable
*Annual pre-tax synergies of 2.5 billion euros to be achieved within three
years from the combination of Elf and TotalFina
*Offer of three Elf shares and 190 euros in cash for every five shares
in TotalFina, representing a premium of 10% to TotafFina's closing price on
Friday 16 July, 1999 (ex dividend)
*Increased value creation for both Elf and TotalFina shareholders
The Board of Elf intends to convene a shareholders' meeting and recommends that
shareholders vote in favour of Elf's offer for TotalFina.
Elf Chairman Philippe Jaffre commented:
'We believe that TotalFina's unwelcome offer both undervalues the contribution
of the Elf shareholders to the combination and misses the opportunity to create
a new industrial project. Our proposal will lead to a focused and high growth
pure play energy group, positioned with the resources to develop on a path
comparable to that of the industry leaders, and a separate chemicals group owned
directly by the shareholders. In addition, this project creates the opportunity
to form one of the best management teams in the industry. Together with our
strong belief that we can deliver synergies exceeding twice those announced by
TotalFina, our proposal combines a stronger industrial vision with a better
value package for both sets of shareholders.'
1. Background to the Offer
The Board has reviewed the analyses performed by the company and its financial
advisors, Goldman Sachs, Banque Nationale de Paris, Morgan Stanley, Lazard
Freres et Cie and Credit Agricole Indosuez, on the basis of the draft
prospectus filed by TotalFina. The Board will issue a complete response to
the TotalFina offer once the prospectus relating thereto has been approved by
the Commission des Operations de Bourse.
With one abstention, the Board unanimously approved an alternative proposal,
which it believes demonstrates a significantly improved industrial plan and will
thus be able to deliver significant additional value to both Elf and TotalFina
shareholders.
2. A New Industrial Concept for the Combined Group
As part of its continuing review of strategic alternatives, Elf had Considered a
combination with TotalFina. Both Elf and TotalFina agree that there is
compelling logic in the combination of their respective activities. However, Elf
believes that TotalFina's proposal both undervalues Elf and does not recognise
the full industrial opportunities offered by this combination. Specifically, Elf
believes that the synergies that should arise from the combination will be
substantially in excess of those identified by TotalFina.
Furthermore, Elf's vision is to release the value within the new group by
separating the oil and energy activities from the chemicals activities, creating
the 4th largest oil group worldwide, and the 5th largest chemicals group,
including the remaining shareholding of 20 % in Sanofi-Synthelabo.
3. Synergies
Elf expects to achieve annual pre-tax synergies of 2.5 billion euros from the
combination - more than double those announced by TotalFina within the same
three-year period, with redundancies in France identical to those identified by
TotalFina.
These synergies have been specifically identified and would be achieved from a
mix of organizational efficiencies, more focused exploration activities and the
roll out of the improvements in business practices already identified by Elf.
Approximately 1.05 billion euros of synergy savings are expected from
exploration and production, mainly from increased capital efficiencies and
reduced production costs. A further 950 million euros are targeted from refining
and marketing, 300 million euros from the combined chemicals activities and 200
million euros from corporate cost savings.
Incremental to these synergies is the potential to reduce the anticipated capex
of the combined group by up to 1.1 billion euros.
In addition, Elf anticipates that there would be significant commercial benefits
which would accrue from the combination.
4. Terms and Conditions
The transaction will be effected through an exchange offer of five TotalFina
shares for every three Elf shares plus 190 euros in cash.
This represents a premium of 10% to the (ex-dividend) closing price of the
TotalFina shares on Friday 16 July, 1999, and values the company at 50.3
billion euros.
The offer is conditional upon approval by Elf's shareholders of the capital
increase required to implement the offer, and the acceptance of at least 66.67%
of the Totalfina shareholders. TotalFina's shares are listed in Paris, on the
New York Stock Exchange in ADS form and on the London and Brussels stock
exchanges. Exchange offers will be simultaneously made to shareholders in
France, the US and Belgium, and Elf intends to apply for the listing of the new
shares created in connection with the exchange offer on the New York, London and
Brussels Stock Exchanges.
5. Enhanced Value For both Elf and TotalFina Shareholders
The Board of Elf strongly believes that compared to TotalFina's offer, this
proposal will deliver enhanced value to both Elf and TotalFina shareholders.
This value will be created through:
*the delivery of substantially greater synergies, reflected in the enlarged
group's market value
*the creation of two separate companies best suited to create and capture
value - a re-rated pure play oil group and a major chemical company with
critical mass in Europe
*selected divestitures and disposals, including 15% of Sanofi-Synthelabo and
other non-core chemicals and oil assets
6. Financial Impact of the Transaction
In terms of both reported cash earnings per share (pre goodwill) and cash flow
per share, it is anticipated that the combination will be significantly
accretive for both Elf and TotalFina shareholders from 2000.
The transaction will be accounted for under US GAAP using purchase accounting.
Elf is being advised by Goldman Sachs, Banque Nationale de Paris, Morgan
Stanley, Lazard Freres et Cie and Credit Agricale Indosuez.
This document is neither an offer to exchange or sell nor a solicitation of an
offer to exchange or buy any of the securities mentioned herein, and the Offer
to which this document relates is not being made in any juridiction in which the
making or acceptance thereof would not be in compliance with the securities laws
of the jurisdiction.
This document may contain forward-looking statements with respect to the
financial condition, results of operations, business, strategy and plans of the
Elf Group. In particular, statements using the words 'expects 'anticipates', and
similar expressions, and statements with regards to management goals and
objectives, expected or targeted production data, trends in results of
operations, margins, or the expected benefits of the tender offer referred to
herein are forward-looking in nature. Cash statements are based on a number of
assumptions that would ultimately prove innacurate, and are subject to a number
of risk factors, including currency fluctuations, the price of petroleum
products, the ability to realize cost reductions and operating efficiencies
without unduly disrupting business operations, environmental regulatory
considerations and general economic and business conditions. The Group does not
assume any obligation to update publicly any forward-looking statement,
whether as a result of new informaton, future events or otherwise. Further
information on factors which could affect the company's financial results
is provided in documents filed with the Commission dos Operations de Rourse and
the US Securities and Exchange Commission.
Media Contact:
Thomas Saunders (33.1) 47.44.42.30
Catherine Durand (33.1) 47.44.37.76
Investor Relations Contact:
Paris - Francoise Leroy (33.1) 47.44.24.63
New York- Chris Hollis 212.922.3004
An Information meeting for the media and the financial community will he held at
10 a.m. tomorrow at the Pavilion Gabriel, 5 avenue Gabriel in Paris.
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