Elf Aquitaine Chairman Philippe Jaffre said he will only enter merger talks with TotalFina if TotalFina agreed to spin off the merged group's chemicals activities into a separate company.
Jaffre told France's LC1 television it would be left to Elf and TotalFina shareholders to decide in two months' time between TotalFina's hostile bid for Elf and Elf's counter-bid if the two companies failed to agree on a friendly deal. He said he was "very confident" shareholders would opt for Elf's proposal.
TotalFina launched a hostile bid for Elf on July 5 to create the world's fourth largest oil company
. Elf responded two weeks later with a counter-bid and said it would spin off
the new group's petrochemicals and chemicals businesses into a separately quoted company.
TotalFina head Thierry Desmarest has called for friendly talks on several occasions but the heads of France's two oil companies have
yet to get around the negotiating table.
Jaffre said he was waiting for Desmarest to accept the industrial logic of separating chemicals - which would employ 50 percent of the merged group's staff and be the world's fifth largest chemicals firm - from oil and refining activities before he would enter merger talks.
"There is a fundamental disagreement between us on the strategy for chemicals," Jaffre said, adding that a merger would only succeed if it was in the interest of all employees.
"I am ready to make lots of concessions to him (Desmarest) but I'm not prepared to make concessions on something, which to me is absolutely fundamental. If he doesn't take a step in our direction, shareholders will decide," Jaffre said.
Jaffre said Elf had consulted 450 of its large long-term shareholders, who own 60 percent of the company's capital, and was confident they would vote in favor of Elf's proposal along with small investors and shareholding employees.
"Total's project as it is currently constructed will be rejected by shareholders and staff," he said.
Jaffre rejected suggestions that the performance of Elf and TotalFina shares indicated the market favored TotalFina's bid, insisting it reflected arbitrage operations by a small percentage of very short-term investors.
The large majority of large and small shareholders would wait until the last minute to decide, Jaffre said.