Europe’s Total and Petrofina Join the Oil Company Merger Scramble

Bent on surviving a new round of mergers shaking up the global oil industry, French petroleum giant Total said Tuesday that it is buying Belgian refiner Petrofina for $11.8 billion in a deal that would create the world’s fifth-largest oil company.

Oil companies are rushing to consolidate to cope with crude prices that have plunged to near their lowest in 12 years. Exxon Corp. also on Tuesday agreed to buy Mobil Corp. for $75.3 billion in stock, creating the world’s biggest publicly traded oil company.

The deal between Total and Petrofina, Belgium’s biggest industrial company, would create a new company, Total Fina, that would be the third-largest oil company in Europe.

“There are a number of mergers now. It would be a danger to stay out of this process,” said Thierry Desmarest, chairman of Total. “The move is part of a global change--oil prices have practically been cut in half over the last year. All companies are seeking to survive in this new situation.”

“This is a good beginning to the restructuring of Europe’s oil industry,” said Jacques-Antoine Bretteil, who helps manage $200 million at International Capital Gestion. “With the price of oil so low, an oil company’s size becomes all the more important. At current levels, oil companies are a good investment for the long term.”

The deal involves a stock swap that would give Total 41% of Petrofina. The remainder of Petrofina’s shares will be bid on at a later date. A combined general meeting of shareholders has been called for Jan. 14 to approve the agreement.

Petrofina, which employs 14,700 people worldwide, has refining and distribution operations in Europe and the United States.

Total employs 54,400 and is France’s No. 2 oil company. It has recently expanded its crude oil and gas businesses.

The Total bid, along with Exxon’s plan to buy Mobil, puts pressure on other oil companies to combine. There has been speculation for weeks that Petrofina was a target, and analysts said Elf Aquitaine of France and Eni of Italy are hunting for companies to purchase.