Shell Bracing for French Bid

LONDON -- Royal Dutch/Shell is bracing itself for a takeover bid, with Shell executives now conceding that it is vulnerable to a predator, reported London-based The Guardian.

Insiders at the Anglo-Dutch oil giant fear Total, the French oil group, will launch a raid. Total, the world's fourth-largest oil firm, is considered the only predator capable of gaining regulatory approval for what would be a spectacular merger.

Total is smaller than Shell, with a market cap of £68 billion against Shell's cap of more than £94 billion. But Total's chief, Thierry Desmarest, has shown an appetite for risk and could have ambitions for a pan-European company.

There are no indications that board members or corporate advisers have spoken about a tie-up, although the possibility of a deal is now the subject of fevered speculation. If the two firms merged, competition rules would force asset sales. The firms' refining businesses, and overlaps in Germany, France and the Netherlands, could see competition authorities demanding disposals.

But there are obvious synergies. Analysts say that Total's strong Middle Eastern presence would bolster that of Shell's, while a single Shell/Total business would be the dominant player in Nigeria. Unlike Shell, Total has a strong presence in Angola.

A leading oil analyst said, "On paper it's a fit, but it's not that easy. Who would be in charge would be a major issue." The firm last night said, "We can't comment on market rumor or speculation."

Shell bosses admit the need to complete a large acquisition to boost oil reserves. This, however, is proving impossible, given the rocketing oil prices making prospective targets reluctant to sell.

It emerged last week that Shell was likely to unify its British and Dutch boards in response to shareholder pressure over its downgrading of oil and gas reserves. The energy group, fined £84 million last week for misleading the market, could even opt for a full merger or takeover among the two holding companies. The firm still faces the prospect of a potentially damaging legal action brought by pension funds and other shareholders over the oil reserves scandal, which could lead to jail for executives.

Shell has stood on the sidelines while the oil industry has consolidated in recent years. Exxon acquired Mobil, which Shell had previously turned down. BP bought Amoco and Arco, Chevron bought Texaco, while Total merged with Elf and Fina.
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