21 August 2017

Total to buy Maersk Oil for $7.45bn


Container shipping group AP Moller-Maersk has agreed to sell its oil and gas division to Total for $7.45bn, as it seeks to focus on its core transport and logistics businesses.

The sale marks the first step in Maersk’s move to break itself up and is likely to be the biggest single transaction. Maersk will receive approximately $4.95bn in Total shares, and Total will assume $2.5bn of short term debt to fund the remainder of the deal. It will also take over all decommissioning obligations, worth around $2.9bn.

The Danish group is getting rid of all its energy-related businesses – which also includes drilling rig and oil tanker units – to concentrate on being a transport and logistics group, centred on the world’s largest container shipping line. It gave itself a two-year deadline last September to achieve the break-up through sales, stock market listings, or mergers.

Maersk has boosted its container business by buying Hamburg Süd, the German operator with a strong position in Latin America, for $4bn. It is also seeking to integrate closer Maersk Line with its port terminals business and other logistics arms in an attempt to become the UPS or FedEx of container logistics, according to Soren Skou, chief executive.

Maersk said it expected to record a gain of about $2.8bn from the deal and that it would return a “material portion” of that to shareholders, subject to securing its investment-grade credit rating first. Shareholders could expect an extraordinary dividend, share buyback, or distribution of the Total shares Maersk will receive in the deal.

Total promised to “maintain Maersk Oil’s strong position in the North Sea,” and its deal comes after it said last month it was ready to make acquisitions while global assets were still cheap.

Patrick Pouyanne, chief executive of Total, said in July that the company had a “strong balance sheet” and would “take advantage of the low-cost environment by being able to launch profitable projects and acquire resources under attractive conditions”.

Total has proved more resilient than many other oil companies following the price slump that struck the industry from 2014, cutting costs faster and earlier, which is now allowing it to invest in new projects.

It has already started making major investments, earlier this year signing a multibillion-dollar agreement to develop part of South Pars — the world’s largest gasfield shared between Iran and Qatar.

The transaction is subject to regulatory approval from the Danish Minister of Energy and a consultation process with Total employees. The deal is expected to close in the first quarter of 2018.