LATE last year Maxol's board of directors was confronted with troubling scenario to develop the company or face the prospect of struggling to maintain its 11 per cent market share. It was not a case of financial difficulties a rival, Statoil, was poised to take over Jet's 257 stations and become one of the biggest players in the petroleum market in Ireland.

The deal would have given Statoil just over 25 per cent of the £1 billion market, a dominant position, with Esso, at around 25 per cent, followed by Shell and Texaco.

Maxol general manager Tom Noonan, admits the Irish owned company was worried that it would be left in a far weaker position because the market would be dominated by four powerful multi national players.

The company said little of its concerns, but the Minister for Enterprise and Employment, Mr Bruton, referred the merger proposal to the Competition Authority.

The authority recommended that the merger be blocked by the Minister because it could reduce competition in the marketplace and lead to higher petrol prices.

Statoil, taken aback by the Minister's decision to block the deal, rejected the findings and took High Court proceedings to have it overturned on a point of law.

The development provided Mr Noonan and Maxol with its own opportunity. At first he thought Maxol should try to acquire Jet. The company wrote to Statoil and Jet to signal its interest.

However, Maxol realised that the Minister was unlikely to entertain this idea, because it would mean just substituting one name for another market share would still be an issue.

Mr Noonan says Maxol contacted Statoil, which initially was not interested and seemed to prefer to concentrate on the ending court challenge. Mr Noonan says he pointed out that given its past performances in other cases, the Government was likely to defend its decision. This would lead to a protracted legal battle, whatever the outcome of the High Court challenge.

Following further deliberations, both parties met on May 29th, each had a list of stations they wanted included in the deal.

The whole deal was negotiated in one sitting, beginning with negotiations in Dublin's Davenport Hotel at 9 a.m. and ending at Dun Laoghaire's Royal Marine Hotel that night at 10 pm.

After consultation with the Department of Enterprise and Employment, the deal was sanctioned by Minister Bruton and the court proceedings were discontinued.

For Maxol the new deal means its market share rises to 15 per cent, for Statoil it share rises from 12 per cent to 20 per cent. Jet, which is owned by Conoco, pulls out of the Irish market; Statoil must still dispose of Estuary, which is owned by its sister company Statoil in Britain.

The deal involved Stat oil selling some of its own stations to Maxol as well as some of the Jet stations. Maxol bought 80 stations. Of these, 18 were stations which Statoil had owned outright, and 26 were dealer owned operations. It also bought 12 Jet stations, which Conoco had owned outright, and 24 dealer operated stations.

Although the value of the Statoil/Jet deal was never disclosed it was estimated to be between £25 million and £30 million. Maxol will not disclose how much it paid for its 4 per cent, but industry sources put it at £5 million plus.

Mr Noonan says the deal must have been painful for Statoil. The Norwegian state owned company was forced to cede several of its company owned stations in good locations.

Dealers have a solus agreement with petrol companies and this comes up for renewal every 10 years. It means that after 10 years, the operator can shop around for another deal, and play one company off against another.

The most valuable operations are company owned, because although the company gets an operator to run the business, it remains the property of the company and adds to its asset base.

The deal will add 45 million litres to Maxol's sales volume. It is expected to help add £40 million to the company's turnover.

"It also gives us a presence in good urban locations where we were under represented - such as Dublin, Bray, Waterford and Cork," says Mr Noonan.

More importantly, he says, it gives Maxol the critical mass it needs to compete strongly. "It brings us from the second division to the middle of the first Division."

Maxol will still find the going tough. Motor spirit sales have remained almost static in the past few years, says Mr Noonan.

Last year petrol sales grew by 3.6 per cent in the Republic, but were down 7.4 per cent in the North as consumers travelled south for cheaper fuel.

Maxol, which is owned by McMullen Brothers, a family firm originally from Belfast, also has 165 petrol stations in Northern Ireland.

The company managed to increase its market share by 1 per cent last year. So how can Maxol increase its sales if the market is static?

Mr Noonan says it can increase volume in many of the outlets it acquired under the recent deal, and through redeveloping sites. It is currently spending up to £9 million refurbishing and developing sites around the country.

Rebranding the Jet and Statoil stations will also cost another couple of million pounds.

Mr Noonan believes the deal is an excellent one for Maxol. "We have increased the size and asset value of the company without any significant overheads," he says.

A rival agrees: "Maxol now has much greater economies of scale - it still has the same overheads for a much greater number of sites."

The Minister's decision to refer the Statoil proposal to the Competition Authority was driven by the price issue. Jet was found to be a low cost operator and it was felt that it would not be in consumers' interest if the company was taken over by Statoil, seen as a higher cost operator.

Mr Noonan believes the deal will lead to more competition in the marketplace. People have become very price sensitive, he says. Maxol policy is to support an operator (splitting costs 50-50) if he reduces prices.

"However, we take a very serious view if we find the operator is not passing on the price reduction. We monitor the pump price - very carefully," he says.

He contends that petrol is and will always be good value for money. If we gave away £10 worth of petrol, you would still have to pay £7 of that £10 to the Exchequer.

"As long as the bulk of the price is made up of duty and tax - the flexibility of price will continue to be limited," he says.

Currently, he says, almost half of all Unleaded petrol sales in Ireland, represent discounted sales.

Mr Noonan says petrol stations, like pubs, will have to constantly "re image".

Consumers want better and more sophisticated petrol stations, with shops. He questions the merit of oil companies running shops in petrol stations, and other options should be examined such as getting a recognised well known retailing brand name in to operate them.

"The focus now will have to be on value for money, getting more value per square foot and being better at marketing the shops," he says.

Although Mr Noonan forecasts that "like it or not" the number of cars on the road will increase in the future - we still lag well behind Europe - it will not lead to much of an increase in petrol sales.

Cars are becoming increasingly fuel efficient," he says, adding that it does not help the lubricants market either, because cars do not need to be serviced so often.

Profits for 1994 were £5.4 million, and will be closer to £4 million for 1995, Noonan says. He predicts that profits in 1996 will be broadly similar.

It is a long way from the 1980s when Maxol lost £1 million one year. Ironically, it was during a time of price control. Mr Noonan says price control retarded Maxol's growth and unlike multinationals, the company could not afford to give subsidies to petrol station operators who were upgrading premises and building convenience stores.

Maxol is proud of its Irishness and the fact that it is competing successfully with powerful multinational companies. "You cannot trade purely on your Irishness anymore," he says. "You have to provide a high standard of service like everyone else."