Shell Resources PLC, a wholly owned member of the Royal Dutch/ Shell Group, announced Apr. 2 an offer to purchase all shares of UK independent Enterprise Oil PLC for £4.3 billion ($6.2 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. Both supermajors had reason to be interested as well as the finances to effect a buyout. Since then, the Enterprise board has taken various steps to repel unwanted suitors (OGJ Online, Feb. 5, 2002).
Elsewhere, in a petrochemicals acquisition, Saudi Arabia Basic Industries Corp, (SABIC), Riyadh, has reached an agreement in principle with Geleen, Netherlands-based DSM BV to purchase DSM's petrochemicals business for 2.25 billion euros ($1.98 billion).
Shell-Enterprise
Shell's offer to buy Enterprise 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 before the 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]ellipseaccelerates the delivery of shareholder returns," he added.
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 EnterpriseellipseWe 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, said, "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 no later than Apr. 30.
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 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, were $56.2 billion (2000: $57.1 billion).
SABIC-DSM
SABIC will acquire DSM's petrochemicals business for almost $2 billion.
In 2001 DSM Petrochemicals generated sales of 2.4 billion euros. It annually sells about 2.6 million tonnes of polymers, mainly in Europe.
In anticipation of the intended sale, four DSM chemical businesses in the Netherlands and two in the US were merged into one organization Jan. 1, 2001, to form the business group DSM Petrochemicals (DPC).
The transaction includes transfer of all shares of companies that form DPC, the associated DPC participations and sales activities, and all related technology, patents, and trade names.
Half of the agreed-upon purchase price will be paid upon closing and the other half 4.5 years after closing, expected to take place June 30, although ownership would be retroactive to Jan. 1. From the closing date, DSM will account for the net revenue of the sale based on its net present value.
SABIC strategy
Following the acquisition, SABIC-already the largest petrochemicals producer in the Middle East-will move from 22nd to 11th largest in the global petrochemicals industry and will become the third and fourth largest global player in the polyethylene and polypropylene businesses, respectively.
Mohamed H. Al-Mady, vice-chairman and managing director of SABIC's board of directors, said: "The acquisition of DSM's successful petrochemical business...will provide us with a strong entry position in the European market and a springboard for SABIC's ambition to become a sector leader worldwide."
The Saudi government owns 70% of SABIC shares. Private investors in Saudi Arabia and other countries of the Gulf Cooperation Council hold the remaining 30%. SABIC's business activities are organized into five industry groups: basic chemicals, polymers, intermediates, fertilizers, and metals. In 2001, SABIC's overall petrochemical production capacity amounted to 35 million tonnes/ year.
About 2,300 DSM employees will be transferred to SABIC, which said the transaction would not lead to any changes in the terms of employment already in force. DPC employees in Geleen will become employees of a new company, De Petrochemicals Limburg BV, and employees at DSM's Gelsenkirchen, Germany, site will continue to be associated with DSM Polyolefine GMBH (DPO), whose shares will be transferred to SABIC.
SABIC said the deal will lead to a strong partnership between itself and DSM. At DPC's Geleen site, for example, the partners will have mutual interdependencies regarding the supply of feedstocks and products and the provision of services and utilities.
