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The Times: The right moment for a buyout

October 24, 2006
By Carl Motishead
 
IT IS a big play on dear oil, but Shell chose its moment well, offering to buy out the Canadian minority investors just after the Shell Canada share price had slumped by more than a quarter in value.

This is a company that rode high on the oil sands hysteria, its share price soaring to C$47 in January, only to tumble to $29. 
 
Canadian investors have been dumping oil sands stocks, scared by the potential squeeze from escalating costs and the falling oil price.

Shell is gambling that oil will remain expensive, in the $50 per barrel range, allowing it scope to invest and exploit vast resources in Alberta. There are compensations; the oil is there, no exploration is necessary and Canada is relatively welcoming.

The puzzle is why Shell tolerated the minority for so long. Shell has owned a quoted Canadian subsidiary since the 1960s, and the multinational took possession of its US minority almost two decades ago.

The answer is probably politics — maintaining a Canadian listing helped keep the political wolves at bay in Ottawa and, more importantly, in Alberta, where exploration acreage is doled out by the provincial government.

Shell took a bruising five years ago when it made a play for majority control of Woodside Petroleum, Australia’s flagship oil company in which Shell has a third interest. The flags went up, the shutters came down and Shell was sent packing.

So far, Canadians seem either less insecure or just sleepy as a whole gaggle of corporate giants are plucked from the Toronto Stock Exchange lists. Shell is just the latest of many and hopes to pass unnoticed.
 
http://www.timesonline.co.uk/article/0,,630-2418310.html
 

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