The hostile $43 billion (€38.22 billion) all-share offer launched by TotalFina this week for Elf Aquitaine, its French rival, would create the world's fourth-biggest oil company.

The as-yet unnamed French "national champion" that would result would rank ahead of Chevron and Texaco, but still well behind Exxon Mobil, Royal Dutch Shell and BP Amoco Arco.

These have emerged as the three giants of the sector after the recent bout of industry restructuring, conducted against a background of relatively low oil prices. The new French group would also be a powerful presence in world chemicals markets.

TotalFina, itself formed by Total's takeover last year of PetroFina of Belgium, is proposing to exchange four of its shares for three of Elf's. It said that this represented a premium of 15 per cent based on last Friday's closing prices. However, by Monday that premium had been wiped out, indicating the market expects a bidding battle.

TotalFina said that it would not be required to accept for exchange any Elf shares unless 66.67 per cent of them were tendered, on a fully diluted basis, as determined on the closing date.

The offer would open following approval by French regulatory bodies, with an offer period of a maximum of 35 business days.

Elf's share capital includes an "action specifique", or "golden share" held by the French state, which requires the prior approval by the French economy minister if any person acting alone or in concert, directly or through an intermediary, comes to hold more than 10 per cent, 20 per cent or 33.33 per cent of the company's capital or voting rights.

According to Mr Thierry Desmarest, TotalFina chairman, joining the two companies would lead to expected annual pre-tax synergies of €1.2 billion over three years, because of the "cultural similarities of the two groups".

TotalFina said that the deal should mean a reduction of about 4,000 in the combined workforce, equivalent to about 3 per cent, with about half the cuts coming in France.

Combining the two companies would lead to "significant improvements" in efficiency in many areas: optimising exploration, refining, logistics and marketing; adopting best practices; and reducing purchasing costs and general overheads.

In exploration-production, the new group would have a "balanced" portfolio of nearly 10 billion barrels of oil equivalent in reserves, representing 13 years' production.

The profitability of marketing in Europe would be improved as a result of better coverage, with market share of about 12 per cent.

Disposals would include part of Elf's 35 per cent interest in SanofiSynthelabo, the recently merged pharmaceuticals group.

Elf indicated earlier this year that it expected to show an exceptional profit of about seven billion French francs (€1.04 billion)in its 1999 accounts as a result of that merger.

TotalFina said that the new entity was projected to provide a recurrent improvement in operating income of €1.2 billion (£95 million) in three years, in addition to growth and productivity programmes previously announced separately by the two groups. This would produce "very strong" earnings growth of at least 20 per cent a year, "assuming a constant environment".

TotalFina said that it hoped that, although unsolicited, the offer would "soon become friendly". It would ensure the management structure of the new entity was set up "in a balanced manner".

Elf, however, said that the offer had not been studied or discussed with its management and was therefore considered hostile.