Shell to improve offer for Woodside

Shell Australia Ltd. has said it will reshape the asset package and associated financial arrangements offered to Woodside Petroleum Ltd. in its bid to gain a 60% controlling interest in the company. Shell has offered to drop certain assets from the package, which will decrease the overall value of the offer but also decrease the package's associated debt.


Shell Australia Ltd. has said it will reshape the asset package and associated financial arrangements offered to Woodside Petroleum Ltd. in its bid to gain a 60% controlling interest in the company.

Shell has offered to drop from the package its equity in the greater Sunrise-Troubadour-Evans Shoal and Scott Reef-Brecknock gas fields off north and northwest Australia as well as Shell�s New Zealand petroleum assets. Although this would reduce the value of the package of assets to $6.5 billion (Aus.) from $7.9 billion, it would also reduce the associated debt to around $700 million from $2.1 billion.

Shell says its offer is worth $1.2 billion (Aus.) more than the value of the assets it would transfer to Woodside. Shell claims this equates to a premium of $1.10/share. This, it said, was a "premium for control."

Shell added that it would be prepared to support this transfer of value, being made available to shareholders through a special dividend or capital return, thus enabling shareholders to gain direct access to the premium. Shell estimates the value to shareholders on the enlarged share base should be $3 billion (Aus.), or $2.70/share when synergies and other benefits are taken into account.

By Shell�s calculations, that represents a premium of 26% over the share price trading range of about $10.50-11.00/share prior to announcement of the proposal.

Shell also said it would be prepared to enter a standstill agreement that prevented it from moving beyond 60% ownership of Woodside share capital.

Woodside rejected Shell�s initial proposal in early July (OGJ Online, July 3, 2000). Directors have yet to comment on the new offer.

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