French energy major Total announced on August 21 that it has agreed to buy the oil and gas exploration and production unit of Danish conglomerate AP Moller-Maersk for $7.45 billion. The deal would allow Total to manage its North Sea operations from Denmark and supervise Total’s operations in Denmark, Norway and the Netherlands.
“This transaction delivers an exceptional opportunity for Total to acquire, via an equity transaction, a company with high quality assets which are an excellent fit with many of Total’s core regions,” Total CEO and Chairman Patrick Pouyanné was quoted as saying in a statement.
“The combination of Maersk Oil’s North Western Europe businesses with our existing portfolio will position Total as the second operator in the North Sea with strong production profiles in UK, Norway and Denmark, thus increasing exposure to conventional assets in OECD countries. Internationally, in the US Gulf of Mexico, Algeria, East Africa, Kazakhstan and Angola there is an excellent fit between Total and Maersk Oil’s businesses allowing for value accretion through commercial, operating and financial synergies,” he added.
Pouyanné said Total would now have a new anchor point in Denmark, which will host the French company’s North Sea Business Unit and supervise Total’s operations in Denmark, Norway and the Netherlands.
“We intend to build on the strong operational and technical competencies of the Maersk Oil teams in the same way we managed to do it in Belgium with the teams of Petrofina in the refining & chemical businesses,” he said.
The proposed transaction is subject to the applicable legally required consultation and notification processes for employee representatives and to approvals by the relevant regulatory authorities, Total said in a press release, adding that the transaction is expected to close in first quarter 2018.
According to the French energy giant, the combination with Maersk Oil offers Total an exceptional overlap of upstream businesses globally which will enhance Total’s competitiveness and value in many core areas, in particular through some high quality growing assets and through the delivery of synergies.
Total expects to generate operational, commercial and financial synergies of more than $400 million per year, in particular by the combination of assets of Total and Maersk Oil in North Sea, an area of excellence for both companies
The transaction is immediately accretive to both earnings and cash flow per share underpinning Total’s dividend profile.
“This transaction delivers an exceptional opportunity for Total to acquire, via an equity transaction, a company with high quality assets which are an excellent fit with many of Total’s core regions,” Pouyanné said.
“This transaction is immediately accretive to both cash flow and earnings per share and delivers further growth over coming years. It is in line with our announced strategy to take advantage of the current market conditions and of our stronger balance sheet to add new resources at attractive conditions. By adding such a portfolio of growing conventional offshore North Sea assets, we confirm our strategy for value creation of, on the one hand, playing to our core strengths in order to grow further and, on the other hand, to constantly seek to lower our break-even by delivering significant synergies,” Pouyanné said, adding that this transaction will deepen and accelerate this strategy significantly, as Total will become a 3 million barrels of oil equivalent per day major by 2019 to the benefit of all Total shareholders.