The French government his decided to slash its direct stake in partly state owned oil company Total to 5% from 31.7%, a surprise move expected to raise 10 billion francs ($1.8 billion).
At the same time, other state owned entities will be asked to boost their combined 2.2% stake in Total to 10%, leaving the government with a net 15% interest in Total vs. the current 34%.
Initially, state owned insurance companies Groupe des Assurances Nationales and Assurances Generale de France will be asked to hike their stakes in Total, but others could be asked to join if needed to meet the 10% target.
The government said its phase-down of participation in Total, established in 1924 to manage French interests in Iraq Petroleum Co., was prompted by the "evolution of the oil context, which differs greatly from what had prompted a significant stake of the state in Total's capital."
WHAT'S INVOLVED
The sale of government interests will require a change in company bylaws to allow the government to sell its shares outside the public sector. That's expected to occur at an extraordinary general assembly meeting of Total scheduled June 2.
At that session, the state also will relinquish its extra 5% voting rights on the company's board that gave it a blocking minority.
The sale of the state's interests in Total will occur in three stages. The government will:
- Exchange its petroleum certificates of nonvoting stock, which in 1987 enabled it to keep its stake in Total without subscribing to an increase in capital, for common shares in a ratio of four certificates for three shares. This won't bring in money but will cut 6.7% of the government's interest in Total.
- Sell 7.8% of its Total interests to state companies for about 4 billion francs ($720 million).
- Dispose of about 12.2% of its interests in Total on the Paris, London, and New York stock exchanges at a date to be determined later and according to the condition of the market. This is expected to raise about 6 billion francs ($1.08 billion).
GOVERNMENT'S FUTURE ROLE
Prime Minister Pierre Beregovoy said for the present the appointment of Total's president still will require government approval.
Industry Minister Dominique Strauss-Kahn went further, saving government approval still will be required for any international agreements Total signs.
"This is normal, for oil is a strategic area," Strauss-Kahn said.
However, the minister noted the partial privatization of Total would make it easier for Total to sign international agreements or make strategic alliances.
"Some foreign companies who wished to form alliances with Total were put off by the state's involvement," Strauss-Kahn said.
He also noted that Ste. Nationale Elf Aquitaine remains a state owned company while Total, which had been largely private, is now even more so.
Stauss-Kahn said proceeds from the sale of Total's shares will be used to finance the government's full employment program.
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