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National Post (Canada): Hiked Shell bid may not be enough

Bissett wants $50 a share 
Reuters, with files from Financial Post
Saturday, January 20, 2007

CALGARY – A boost of 15% to 20% to Royal Dutch Shell PLC’s $7.7-billion bid for the minority shares of Shell Canada Ltd. may still be not enough to win support from investors, several institutional shareholders said.

Reports yesterday said Royal Dutch is working behind the scenes to sell investors on the idea of raising its bid for the 22% of Shell Canada it doesn’t already own to $46 to $48 a share from $40.

Aiming to bolster its own reserves with Shell Canada’s extensive Alberta oilsands holdings, the Anglo-Dutch oil major said in October it wanted to buy out the minority.

Alex Wright, a spokeswoman with Royal Dutch in London, said yesterday the company would not comment on speculation about an upgraded offer price, or on reports an announcement may be imminent.

“I’m aware of the rumours today, but we have no comment,” Ms. Wright said.

Garey Aitken, director of equity research at Calgary-based Bissett Investment Management, which owns 4.4-million Shell Canada shares, said his firm has not been approached by Royal Dutch Shell about an offer exceeding its initial $40 bid.

“I would know, and we have not been contacted by Royal Dutch Shell,” Mr. Aitken said.

He told Reuters Bissett’s work to determine the intrinsic value of Shell Canada suggests $46 would not be high enough.

“It’s hard to put a really precise number on this, but generally, I think where we would come out is more like $50,” he said.

A $48 bid would put a value of $8.7-billion on the minority interest in Shell Canada.

Investors are still waiting for a report from Shell Canada’s special board committee evaluating the parent company’s original bid. Royal Dutch Shell has yet to mail a formal offer.

One U.S.-based hedge fund manager, a holder of “several hundred thousands” of Shell Canada shares, said he, too, had not been contacted, but speculated Royal Dutch Shell is trying to achieve a degree of confidence in its attempt to consolidate its oilsands position and to add reserves prior to investor open houses planned for Feb. 1 in The Hague and London, and in New York City on Feb. 2.

“I said from the get-go that mid-40s would be enough to have all of us in the U.S. fall in line — that it’ll be a small number of Canadian institutional investors that control the outcome here,” he said.

Jarislowsky Fraser Ltd, which owns 29.5 million shares, or about 17% of the minority stake, has told the Shell Canada special committee what its sale number is.

It’s “into the $50s,” said Len Racioppo, Jarislowsky Fraser’s chief investment officer.

“It makes sense that they wouldn’t contact us because they’d go after the low-hanging fruit first and work up, meaning they’d first go to the hedge funds that got in when this thing was announced and went to the $42-range, the funds that’d be happy walking after they get their $2 or so above that,” he said.

Shell Canada is best known for its national gas station network and its Alberta oilsands holdings.

It is the majority owner of the 155,000 barrel-a-day Athabasca Oil Sands Project, a development at the early stages of a 100,000 barrel-a-day expansion that could cost as much as $12.8-billion.

The company is scheduled to report its 2006 results on Jan. 24.

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