Totalfina is offering four shares for three, valuing Elf at 42 billion euros ($ 43 billion), and Totalfina president Thierry De Smarest expressed confidence that the French state would permit the takeover under the terms of a "golden share" it retained when Elf was privatised.

If successful, Totalfina's new market capitalisation of over $ 85 billion would make it the world's fourth largest global oil company, behind Exxon Corp, BP Amoco, and Royal Dutch/Shell, and ahead of Chevron Corp.

The price of shares in Elf Aquitaine rose by 17.34 per cent to 171.20 euros and stock in Totalfina rose by 1.72 per cent to 130.20 euros. Totalfina and Elf would produce two million barrels of oil per day, would have annual sales of 67.232 billion euros, would be capitalised at about $ 95 billion (93 billion euros) and would employ 135,000people.

Exxon and Mobil merger, which depends on approval from US and EU competition authorities, would create the biggest oil group, producing 4.2 million barrels of oil per day.

Totalfina was born on June 14 with completion of a takeover by Total of France of Fina of Belgium, and oil analysts in London thought the French state was likely to allow the new takeover.

French Finance Minister Dominique Strauss-Kahn, who tried unsuccessfully recently to force three banks in a takeover battle to compromise in the national interest, said that the state would give its view in due course. Elf has described the bid as hostile and as running against the interests of its shareholders.

Industry analysts said the aggressive bid could attract rival offers, although the state's golden share, and a desire on the part of the authorities to keep its oil industry French, could deter potential predators. "This is the first shot of several maneuverings. We await the rest of it," said Jeremy Elden of Commerzbank. "Youwill see a substantially higher price for Elf than this one, possibly as much as 190-200 (euros) per share," he said.

Elden said other bidders could enter the fray, including Shell, Italy's ENI or Chevron. Downstream, the combined French group would be able to tap a rich seam of cost savings in France and continental Europe, which Totalfina put at 400 million euros by 2002.

In exploration and production, Total's Middle East, Far Eastand North Africa portfolio fits neatly with Elf's West African and North Sea assets, giving 9.6 billion barrels of oil equivalent in reserves, or roughly half the reserves of each of the three biggest oil companies. Desmarest said he believed the two French companies needed "to join forces to assure continued solid growth and to take our place as an oil major of the first rank at a time when the industry is restructuring on a global scale."