Total, Petrofina revise merger expectations

Only a few weeks after announcing its merger with Petrofina, Total has revised upwards its expectations of synergies from the transaction. In addition to the "identified and quantified" synergies that Total said earlier would generate operating profits of 2.1 billion francs/year by 2002, the firm has now identified "complementary" synergies that could generate further operating profits of 1-2 billion francs/year. Total also has indicated that about 1,000 jobs will be cut following the merger.

Dec. 21, 1998

2 min read

Total also has indicated that about 1,000 jobs will be cut following the merger. The total combined workforce of the two firms is about 69,100.

Additional gains

The identified and quantified synergies break down as: 1.5 billion francs from refining and petrochemicals, 350 million francs from upstream, and 250 million from overhead and procurement cost cuts outside of refining and petrochemicals. Further operating gains would be generated by reducing refining costs via unit specialization, lowering insurance costs, improving lending rates, and divesting marginal businesses.

Publication of the new figures was prompted by a 17% drop in Total's share price following the merger announcement. Shareholders apparently saw the deal as a change from Total's strategy of balancing the different sectors to one that favors the upstream.

Total Pres. & CEO Thierry Desmarest told shareholders that Total will strive to achieve a medium-term balance in capital employed of 50% for the upstream, 30% for refining and distribution, and 20% for chemicals.