Mergers and takeovers have historically been very important in shaping the petroleum industry, both in Norway and internationally. This paper deals with the takeover[3] of Saga by Hydro and Statoil (hereafter the Hydro/Saga takeover). The aim of the study is to describe the process and examine the forces that led to this takeover.
It is probably seldom that a decision about a major industrial restructuring is taken during a TV debate. But that is what happened on Norwegian Broadcasting Corporation’s (NRK) talk show “Redaksjon 21” on April 28, 1999. Norsk Hydro’s CEO, Egil Myklebust, was participating, together with a handful of other key energy commentators and executives, to discuss the future structure of the Norwegian oil industry. The Minister for Petroleum and Energy as well as the deputy leader of the opposition Labour Party were present. Egil Myklebust, who for months if not years had been evaluating the possibility of making a bid for the private Norwegian oil company Saga Petroleum, listened to the discussion. As the discussion turned to the challenges for the industry and the topic of restructuring, the minister indicated, albeit in an indirect manner, that it was up to the industry itself to come up with proposals to solve the structural questions that the sector faced.[4] Following the program, Egil Myklebust went home and thought about what had been said and decided he would make a bid for Saga. Having hesitated for a long time about if and when to make a move, he finally decided that the timing was right. The next day he called a meeting of Hydro’s board and on May 10 Hydro made a bid for Saga.
Things then moved very fast. Hydro had made its strategic move and at a stroke had set the premises for the ensuing debate and subsequent decision. The entry of the French oil company Elf into the bidding temporarily challenged Hydro’s plans, but on June 18, 1999 Saga Petroleum issued a press release announcing that more than 90 percent of Saga’s shareholders had agreed to sell their shares, accepting a combined offer made by Hydro and Statoil. (Statoil had subsequently entered the picture as a co-purchaser). The takeover represented the end of the “truth” that Norway would have three national oil companies and represented the end of an industrial dream that had started 27 years earlier. The creation of Saga in 1972 was a result of a deliberate government strategy to force Norwegian private interests to coordinate their interests in the petroleum industry. [5]
The case study raises a number of key questions about this kind of industrial restructuring. Some are general in nature and would apply to all industries. Others are more specifically related to the Norwegian policy context.
This paper will concentrate on “what happened” and on finding a methodological framework. But the study also points to two more general issues that will be examined in more depth as it progresses; firstly the question of “corporate governance” and the primacy of the shareholder, and secondly how oil policies are being formulated.
There are a number of reasons for writing this case study. The takeover by Hydro:
- Was at the time the largest takeover or merger in Norwegian industrial history and raised a number of general and interesting issues related to mergers and acquisitions (M&A) activities both inside and outside the oil industry
- Represented the first step in the unwinding of Norway’s “oil model” as it was laid down from the early 1970s by successive governments. With the part-privatization of Statoil other (and more dramatic steps) were to come.
- Raised a number of basic questions about power relations in Norwegian society, in particular the interaction between the political and the corporate sectors in determining national petroleum policies.
The takeover raised considerable interest and bitterness in its time. Tempers have now cooled and all parties involved have gotten on with their lives and careers. In retrospect perhaps it may not have been unnatural for Saga to disappear as a commercial entity 27 years after its creation. de Geus[6] shows that the average life span of large companies in the western world has been around 25 years.
[3] A takeover is here defined as a situation where an acquiring company makes a bid for an acquiree. Takeovers can be both friendly and hostile[]
4 The transcript from the TV debate shows that she talked about the necessity of finding “new solutions” to the issues facing the industry. At no point during the debate did she indicate that Saga’s situation was special and that it should be excluded from a “rethink”.[]
5 “The Norwegian state should contribute to a consolidation and a concentration of Norwegian) interests within the Norwegian oil industry”, Parliamentary Report no.76 (1970-71), p. 20.[]
6 Interview with author; see de Geus, Arie. 1997. The living company. Boston: Harvard Business School Press, pp 8-9 for a further discussion of this theme. Today the average lifespan is probably significantly shorter than 25 years.