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Shell’s auction of its LPG business could raise £1.6bn

Sunday Telegraph: Shell’s auction of its LPG business could raise £1.6bn

By Sylvia Pfeifer (Filed: 29/05/2005)

 

Shell, the Anglo-Dutch oil giant, is to auction its liquid petroleum gas (LPG) business and is hoping for bids of up to $3bn (£1.6bn).

 

It is understood that relevant information will be sent to prospective buyers in the next two weeks. Some of the world’s largest private equity players have expressed an interest in the business, which generates earnings of about $400m. Analysts believe Shell could get as much as $3bn for one of the largest players in the global LPG market.

 

Strong cash generation and good management make the business ideal for a private equity buyer. US buyout funds, including Kohlberg Kravis Roberts, Blackstone and Texas Pacific Group, are believed to be interested, along with their European counterparts Permira, BC Partners and CVC Capital Partners.

 

Repsol, the Spanish oil giant, is believed to be in talks with several private equity companies about teaming up to make a joint bid.

 

Shell announced a strategic review of the business last year after receiving an unsolicited approach. A successful sale would be a further significant stage in Shell’s plan to raise $10bn to $12bn though disposals. The plan was launched last year by Jeroen van der Veer, the chief executive, and is designed to help fund the oil giant’s £25bn investment in its oil reserves.

 

The company earlier this year sold Basell, its plastics business, for $5.7bn to the New York-based Access Industries and the Chatterjee Group. InterGen, its US power generating business, has also been sold for $1.75bn to a consortium of AIG Highstar Capital, a US investment fund, and Ontario Teachers’ Pension Plan, the Canadian pension fund. Shell launched the disposal programme after having to cut its proven oil and gas reserves.

 

The scandal led to the departure of Sir Philip Watts, the chairman, and a shake-up of its management structure.

 

Shareholders will next month vote on the merger of its two operating units, Shell Transport & Trading, the UK subsidiary, and Royal Dutch Petroleum, the Dutch arm.

 

The merger will create one of the largest companies in the FTSE100 with a market value of £115bn.

 

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