In an all-paper deal, the new Total Fina group would have pre-forma 1997 sales of $52.96 billion, a net income of $1.92 billion and a combined market value of $38.8 billion based on Friday's share prices.

Total said in a statement the transaction would allow substantial cost savings in both exploration and production as well as in refining and marketing.

The transaction is subject to shareholders approval and the green light by European and US trade regulators. It is expected to be concluded in the second quarter of 1999. The group will seek stock listings in Paris, Brussels and New York.

There had been rumours for weeks that Petrofina's largest shareholder, Albert Frere, was in talks to sell a large stake but until this weekend the market had expected larger French group Elf Aquitaine SA to bethe buyer.

The transaction will take place in two main steps.

Total has agreed with a number of large Petrofina shareholders to buy a 41-per cent stake in exchange for new Total shares at an exchange basis of nine Total shares for two Petrofina, valuing Petrofina shares at 19,482 Belgian francs. Petrofina closed at 14,250 francs on Friday, it was suspended on Monday.

The companies selling shares are Electrafina, CNP, Tractebel, Electrabel and Fortis.

After all approvals, Total will make a buyout bid for the rest of the Belgian petrochemicals group at the same exchange terms.

Petrofina shareholders will get a gross dividend payment of 460 Belgian francs per share at the beginning of 1999.

Total said the merger should lead to an increase of sometwo billion French francs in operating income within three years.

It said in a statement the transaction would be non-dilutive from 2000 forward and should contribute to an increase in earnings per share close to 10 per cent within three years.

With acombined market value of $38.8 billion, Total Fina overtakes Elf Aquitaine, number eight in the world with a value of $35.4 billion, and comes behind Italy's ENI which rates $50.4 billion.

It said the combined company would allow the new entity to capture substantial gains in exploration and production productivity, particularly in the North Sea, and to expand its positions in deep offshore waters in the United States and Angola.

In refining and marketing, the group will hold solid positions in Benelux, France, the United Kingdon, Germany, Spain and Italy.

Joint management of the refineries and the marketing networks will yield substantial productivity gains.

In northwest Europe, the combination of Total's refineries with those of Petrofina in Antwerp and Feluy would allow the new group to more efficiently meet constraints imposed by new European fuel product specifications, Total said.

The headquarters for refining-marketing and for Petrochemical will be located in Brussels.

Total's executivechairman Thierry Desmarest will be comechairman of the board, with Albert Frere and Jean Syrota named vice-chairmen.

Francois Cornelis, chief executive of Petrofina, will become vice-chairman of Total Fina's executive committee, to be chaired by Desmarest.