By Ed Crooks, Energy Editor
Published: January 24 2007 02:00 | Last updated: January 24 2007 02:00
Royal Dutch Shell has raised its offer for the minority shareholding in Shell Canada, its 78 per cent-owned subsidiary, reflecting determination to secure control over what it expects to be one of its most important areas for future growth.
The new offer is C$45 a share, up 12.5 per cent from C$40 originally offered in October last year.
It values the 22 per cent minority holding at C$8.7bn (£3.7bn), C$1bn more than the first bid.
The new offer has been recommended by a special committee of independent directors of the Shell Canada board who were appointed to advise on the deal.
Shell described it as “a full and fair price”.
It is still below the C$50 a share that some investors had said they thought was reasonable, but the market yesterday implied that the new offer was likely to be enough to secure sufficient acceptances. In afternoon trading, Shell Canada’s shares were only a few Canadian cents above the offer price, at about C$45.09.
Shell Canada’s most promising asset is its stake in the Athabasca oil sands project, an important development in Canada’s vast oil sands reserves where an expansion programme costing C$12.8bn is under way.
Those reserves arecurrently the world’s most expensive source of oil and depend on a high price of crude to be profitable.
In committing £3.7bn to the deal, the Anglo-Dutch company is making a vote of confidence in the outlook for the oil sands industry. It wants to buy out the minority holdings to consolidate and restructure the management of Shell Canada.
Shell’s long-term development prospects took a blow at the end of last year when it was forced to sell half its holding in the $22bn Sakhalin-2 gas and oil project off Russia’s eastern coast.
Peter Hitchens, an analyst at Teather & Greenwood, said: “The big growth opportunities for Shell have been either where it has yet to find oil, or projects such as Sakhalin and Canadian oil sands.
“Canada is becoming a core area for the company and it is far better to have direct control over that.”
Copyright The Financial Times Limited 2007