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THE TIMES: Shell scraps LPG auction after bidding falls short

By Peter Klinger
ROYAL DUTCH SHELL has scrapped the €2.5 billion (£1.7 billion) sale of its global liquefied petroleum gas (LPG) unit after an 18-month auction failed to generate a satisfactory price.
Shell said yesterday that it would retain the LPG division instead in a move that would provide “better value” for the Anglo-Dutch group’s shareholders.
It denied that the decision represented a “change of strategy”, but analysts expressed disappointment at the Anglo-Dutch group’s failure to stick to its plan and sell it. Shell’s shares eased 14p to £18.36, although the decision to retain the LPG unit is not expected to materially change the financial outlook for the group.
One City analyst described the decision to scrap the LPG auction as “clumsy”. Another said that the process had “never really got off the ground”.
Initially the auction had generated interest from industry players such as Repsol, Total and the Dutch conglomerate SHV, alongside a number of private equity firms. BC Partners and a Bain-PAI Partners consortium were among the shortlisted bidders.
However, a triple setback late last year, which culminated in Shell issuing a negative trading outlook for the LPG unit’s key French operation, unsettled potential buyers. Bidders had been spooked already by the sudden departure of Mike Treanor, head of the LPG division, and news that authorities in Britain and Poland had launched investigations into claims of anti-competitive pricing. As a result, final bids for the LPG unit are thought to have been pitched around €1.5 billion, a level that analysts believe was substantially below Shell’s own valuations.
The LPG unit makes about €200 million a year in earnings before interest, tax, depreciation and amortisation.
Ron Blakely, Shell downstream executive finance vice-president, said yesterday that the decision to scrap the auction would have no bearing on the group’s previously flagged plan to sell up to £8.5 billion of peripheral businesses, which had been achieved already. Shell needed to divest the assets to fund an aggressive growth campaign.
Mr Blakely said: “We made clear all along in this process that our LPG business is robust and meets our portfolio criteria. We would only sell if the values and terms of the sale would offer greater value than we would assign to these assets ourselves.”
Shell’s LPG unit is based in in London and sells 2.9 million tonnes of LPG to customers in about 40 countries. Shell has a 2 per cent share of the global LPG market.
LPG is a mixture of butane and propane that is commonly used for cooking, heating and transportation purposes. It is a byproduct of oil production and is separated during the refining process.
Meanwhile, Shell is restoring production at its Tern Alpha platform in the North Sea after the facility was rocked by a fire in the gas processing area on Thursday. The platform can produce 25,200 barrels of oil a day, but it is expected to take three weeks to return to full output capacity.

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