French firm Total is buying Maersk Oil in a $7.45 billion deal which the oil major said would boost its earnings and cash flow, and bolster its dividend prospects. As Kate King reports, the deal allows Maersk to concentrate on its primary business, transport and logistics.
Container shipping giant A.P. Moller Maersk has made the first step in its bid to restructure and strengthen. It's selling its oil arm to French firm Total in a 7.45 billion dollar deal. (SOUNDBITE) (English) SIMON FRENCH, CHIEF ECONOMIST, PANMURE GORDON, SAYING: "This a strategic call rather than a market call on M&A, for Maersk it gives them management an opportunity to realize the value of those assets but also focus back on the part of the economy, part of their their market share which they're most known for the shipping business and provide that strategic focus that investors have been looking for." In September last year the Danish group gave itself two years to achieve the break-up, in order to concentrate on being a transport and logistics group. Under the terms of the deal Maersk will get $4.95 billion in Total shares And Total will assume $2.5 billion of Maersk oil debt. Maersk plans to give its shareholders an extraordinary dividend, share buyback or distribution of shares in Total. The deal is yet another sign of renewed faith in the oil market, which has seen some of the world's top oil companies looking to pounce while assets are cheap. BP, Kosmos Energy, ExxonMobil and Norway's Statoil among those to announce new investments. (SOUNDBITE) (English) SIMON FRENCH, CHIEF ECONOMIST, PANMURE GORDON, SAYING: "I think the longer we go on with sub 50 dollar a barrel oil prices, M & A is inevitable as the weak look to sell off assets and some of the stronger ones look to buy them up at what they would consider to be, low oil prices in the context of the cycle." Maersk shares were up 4.3 percent in early trading, while Total shares dipped 0.5 percent. The transaction is subject to approval, but is expected to close in the first quarter of 2018.