unprecedented $42 billion in commitments to finance Elf Aquitaine's reverse hostile bid for Totalfina.
The financial backing includes 41 institutions. Assembling this cast of participants is just the latest installment in what has become a fierce battle for control of France's two biggest oil companies. Totalfina launched a $43 billion hostile bid for Elf Aquitaine on July 5. Elf Aquitaine responded by launching a counter-bid for Totalfina on July 18, at the urging of Goldman, its financial adviser.
To back its countermove, Elf Aquitaine has bolstered its offer with cash representing about 20% of the $51 billion bid. Goldman is leading the bank financing with help from Banque Nationale de Paris, Credit Agricole, and Morgan Stanley Dean Witter & Co. The four companies have committed a total of $18 billion to the loan effort.
Elf Aquitaine's defensive move is similar to the "Pac-Man" defense popularized in the 1980s as U.S. companies sought to fend off hostile buyers by launching bids for them. What is unusual is that Goldman, a firm that has a reputation of staying away from hostile takeovers, is orchestrating the moves of Elf Aquitaine and leading a financing package that may be the largest ever.
"The Elf Aquitaine deal is another example of marrying merger advice and financing expertise," said Edward C. Forst, co-head of bank loans for Goldman. "We're pleased to be part of the lead."
Goldman's aggressive posture with Elf Aquitaine belies the quiet build-up of its syndicated lending team over the summer. The firm recently hired Doug Henderson and John Simonson from Chase Manhattan Corp. and Robert Wagner from Bankers Trust Corp. But Goldman continues to focus its loan business on M&A deals, financial sponsors, and telecommunications.
Its syndicated lending efforts in the United States have been far from overwhelming. In April, Goldman and Chase co-led a $30 billion syndicated loan for AT&T Corp.
But last year it ranked 17th among U.S. loan managers by syndicating 27 deals with proceeds of $9 billion, giving it a market share of less than 1%, according to Thomson Financial Securities Data Co.
Goldman has been redirecting some of its U.S. firepower to Europe, to build a stronger overseas business. Last year it moved James Karp, formerly head of its U.S. lending team, to London. In Europe, Goldman has participated in multibillion-dollar deals for companies such as Repsol and Vodafone.
Yet it is Goldman's role with Elf Aquitaine that has served notice to the loan market -- by virtue of the deal's size and audacity. "It represents one of the hallmark deals of 1999 and beyond," Mr. Forst said.
Steven A. Pfeifer, an analyst with Prudential Securities in New York has been critical of Goldman's strategy and Elf's bid. He said the loan financing isn't the problem, but that the plan for Totalfina was poorly thought out.
Not everyone is so critical. Frank P. Knuettel, an analyst with PaineWebber Inc. in New York, said Goldman and Elf Aquitaine have done a reasonable job fending off Totalfina.
"There's no mystery to it. It's just a classic Pac-Man defense," Mr. Knuettel said. "The odds are, based on what American investors are saying, that Total has a better plan, and sometimes cachet defines the day."