Total May Sell Condom, Glove Unit to Focus on Oil; Hires SocGen

By Anne-Sylvaine Chassany and Tara Patel

Aug. 8 (Bloomberg) -- Total SA, Europe's third-largest oil company, may put its glove and condom-making unit up for sale to exit businesses that aren't related to energy, three people familiar with the matter said.

Total hired Societe Generale SA to arrange the sale, which may start as soon as next month, said the people, who declined to be identified because the transaction is private. Paris-based Total expects bids of about 500 million euros ($773 million).

The company failed three years ago to sell the unit, which is part of the Hutchinson rubber-processing division, after offers fell short of price expectations, the people said. Now Total wants to seek bids again as Chief Executive Officer Christophe de Margerie focuses on divisions that will profit from oil trading close to $120 a barrel.

``These consumer activities don't fit in Total's strategy and dilute the company's return on capital,'' said Chicuong Dang, an analyst at Richelieu Finance in Paris, which has $6.2 billion under management. ``The market for buyouts may be more difficult but Total is in no hurry.''

``Total plans to continue to optimize its asset portfolio,'' the company said in the annual report published on its Web site April 3. Spokesman Kevin Church declined to comment.

Hutchinson's consumer unit, which sells rubber gloves, sponges, baby bottles, pacifiers and Billy Boy condoms, generated about 450 million euros of sales in 2007, according to the company's Web site. Earnings before interest, taxes, depreciation and amortization were about 11 percent of sales, the people said.

Rubber Gloves

Total may struggle to get the target price because leveraged buyout firms, which would be likely bidders, find it hard to raise debt financing as the credit crunch forces investors to spurn all but the safest forms of debt. Banks in Europe have curtailed lending while they unload loans provided to previous deals. Only one company has sold high-yield, high-risk bonds in Europe this year.

Sales at the Hutchinson rubber unit, which operates plants in Europe, U.S. and Asia, rose 5 percent to 3.02 billion euros in 2007, according to the annual report. The company supplies rubber products including anti-vibration and insulation parts for carmakers such as General Motors Corp., as well as for train and aircraft manufacturers.

Total is getting rid of other assets that aren't part of its oil business. In May 2006 it floated the Arkema chemicals unit, with a market value of 1.75 billion euros. De Margerie also said he plans to sell Total's 13 percent stake in drugmaker Sanofi- Aventis SA, having sold 0.4 percent in the fourth quarter for 316 million euros.

Boost Investment

Total is seeking to increase oil production an average 4 percent a year until 2010 and plans to boost investment by 19 percent this year to a record $19 billion.

The company posted a 39 percent increase in second-quarter profit on Aug. 1, helped by record crude prices. Net income climbed to 4.73 billion euros from 3.41 billion euros a year earlier while adjusted profit rose 20 percent to 3.7 billion euros. Oil and gas production rose 1.3 percent to 2.353 million barrels of oil equivalent a day in the quarter.

To contact the reporter on this story: Anne-Sylvaine Chassany in Paris achassany@bloomberg.net