Woodside has signed a binding buy-back agreement to purchase 78.3 million of its shares—representing a 9.5% stake in Woodside—from Shell for $2.7 billion. This equates to about $36.49 (Aus.)/share.
In addition, Shell has entered an agreement to sell another 78.3 million shares through an underwritten sell down to institutional investors at $41.35 (Aus.)/share.
Woodside’s selective share buy-back is subject to shareholder approval along with an independent expert providing an opinion that the transaction is fair and reasonable to all Woodside shareholders.
The buy-back price includes a capital component of $7.95/share with the remainder of the buy-back price comprising a fully franked dividend.
Following the buy-back, Woodside will have a franking credit balance of $1.88 billion.
Woodside says the proposed buy-back will be funded from a combination of the company’s existing cash and debt facilities.
An extraordinary general meeting to enable shareholders to vote on the issue is likely to be held in early August. The transaction requires approval of 75% of shareholders (excluding Shell and its associates) who vote either in person or by proxy. It also requires consents under a number of Woodside’s facility agreements.
Woodside’s board recommends shareholders vote in favor of the buy-back.
The institutional sell-down is expected to be completed by June 18.
Woodside Chief Executive Officer Peter Coleman said the combined transaction is an efficient and disciplined use of capital and creates value for all shareholders.
“In parallel, it allows us to optimize the company’s near-term capital structure while maintaining the capacity to continue development of existing projects and make additional investments in new growth opportunities,” he added.
Shell Chief Executive Officer Ben van Beurden said the sell-down was part of the company’s drive to improve its capital efficiency and focus its Australian growth in directly owned assets.
Shell’s 23.1% shareholding in Woodside came after its aborted takeover bid for the company in 2001 when the controversial bid was vetoed by then-Australian Treasurer Peter Costello on the grounds it was contrary to national interests.
The new deal will remove the uncertainty regarding Shell’s stake in Woodside that has been persistent for some time.