Shell offers to purchase Enterprise for $6.2 billion

By OGJ editors
HOUSTON, Apr. 2 --Shell Resources PLC, a wholly owned member of the Royal Dutch/Shell Group, today announced an offer to purchase all shares of UK independent Enterprise Oil PLC for £4.3 billion ($6.19 billion).

The action, which includes a cash offer of £3.5 billion and assumption of net debt of £800 million, follows months of speculation regarding potential Enterprise suitors.
Those suitors included primary candidate ENI SPA, Europe's fourth largest oil company (OGJ Online Feb. 1, 2002), which said it had been investigating Enterprise—among other companies.

BP Group PLC and TotalFinaElf SA had also been mentioned as possible suitors after Enterprise said in late 2001 that it had been approached about a buyout but did not disclose the suitor, and both supermajors had reason to be interested and had the finances to effect a buyout. Since then, the Enterprise board has taken various steps to repel unwanted suitors (OGJ Online, Feb. 5, 2002).

The offer
Shell's offer represented a cost of 725 pence/share, a premium of about 15% on the closing price of 629 pence/share on Mar. 28, the last business day prior to the date of announcement.

Enterprise directors, advised by Rothschild and Morgan Stanley, said that they consider the terms of the offer fair and reasonable and intend unanimously to recommend that Enterprise shareholders accept the offer.

"For Enterprise shareholders, the offer represents a premium of almost 60% to the average price at which Enterprise shares were trading in the month prior to the announcement on Jan. 8, 2002, of an unsolicited approach from a third party," said Enterprise Chairman Graham Hearne. "[The offer] accelerates the delivery of shareholder returns," he added.

Commenting on the offer, Philip Watts, Chairman of the Shell Group's committee of managing directors, said, "We are delighted to have agreed [to] a recommended offer with the board of Enterprise. We look forward to integrating Enterprise's assets and capabilities into Shell's existing portfolio."

Walter Van de Vijver, another member of the Shell managing committee, added, "This transaction will add 6% to our hydrocarbon production and some 1.5 billion boe to our reserve base at a competitive acquisition cost." He said the deal would also complement Shell E&P's North Sea activities and provide "growth opportunity in Italy and improve Shell's position in Brazil," where Enterprise has a strong presence.

Shell said it would post the formal offer document to shareholders "as soon as is practicable," and not later than Apr. 30, 2002.

Following the buyout offer announcement, Standard & Poor's affirmed the AAA long-term corporate credit ratings on the Shell companies, which it gave them following Shell Oil Co.'s announcement last week that it would acquire Pennzoil-Quaker State Co. (OGJ, Apr. 1, 2002, p. 34).

For the year ended Dec. 31, 2001, Royal Dutch/Shell Group reported total operating profit of $20 billion (2000: $24.5 billion) and income before taxes of $19.9 billion (2000: $24 billion). Royal Dutch and Shell Transport & Trading's combined interests in group net assets as of Dec. 31, 2001, were $56.2 billion (2000: $57.1 billion).

ENI
Meanwhile, ENI, which saw its stock rise slightly after Shell's announcement, is not expected to counter the offer and is in fact engaged in a share buy-back program to repurchase its own stock.

Its board will propose at its next shareholders' meeting that the company continue the program up to a maximum 400 million shares, which would represent about 10% of the entire capital stock, for an amount not exceeding 5.4 billion euros. ENI currently has acquired 159,474,138 shares, or 4% of its entire capital.

The company also is planning to merge its wholly owned refining and marketing subsidiary AgipPetroli SPA into ENI SPA. The proposed incorporation represents the third phase of a program to increase operations efficiency, reduce the number of subsidiaries and costs, and strengthen the company's strategic integration.