Gulf and Elf merger negotiations collapse

The UK operations of two oil giants, Gulf and Elf, have unexpectedly abandoned merger negotiations after failing to reach agreement on a venture to restructure their petrol retailing businesses.

The collapse of the planned deal, announced last November after British Petroleum had merged similar businesses in the UK with Mobil, is a serious blow to both companies which have been faced by falling profit margins in the notoriously competitive petrol market. The original plan was for a three-way merger, but the third partner, Murphy of the US, pulled out of the provisional agreement earlier this year.

Gulf and Elf would have had a combined 1,000 service stations in the UK and two oil refineries. The deal had faced stiff opposition from trade unions concerned at the planned closure of Elf's Wembley headquarters and the move to centre administrative operations at Gulf's office in Cheltenham, with the loss of 470 jobs.

In a statement yesterday Gulf and Elf said the merger "did not provide sufficient economic incentive to proceed". It emerged that the negotiations, conducted by senior executives from Elf in Paris and the Chevron Corporation, Gulf's San Francisco parent group, had become bogged down over the size of stakes the two partners would receive in the business and the value of their assets.

A Gulf spokesman said the group was still interested in seeking joint venture opportunities to rationalise its retailing activities.

He admitted both parties' petrol retailing arms had been "relatively weak," with just 4 per cent each of the UK market. "It's back to square one," he said.