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Globe and Mail (Canada): Appraisal could reignite Shell bid debate


CALGARY — Shell Canada Ltd. could be worth as much as $9.3-billion — higher than Royal Dutch Shell PLC’s current offer for the part of the company it doesn’t already own.

The independent valuation is contained in Royal Dutch’s formal $8.7-billion offer for the remaining 22 per cent of Shell Canada, which it had to include in a takeover bid circular filed with Canadian securities regulators by Royal Dutch Thursday after North American markets closed.

CIBC World Markets Inc. tallied the value on behalf of Shell Canada and the results could reignite debate over the price being paid for the company, which died down a week ago after Royal Dutch said it would “move on” if its current offer fell short.

“It’s nice to finally have something concrete to evaluate,” said Ari Levy, a vice-president at TD Asset Management Inc., one of Shell Canada’s largest shareholders. “I will be reviewing it thoroughly this evening, dissecting it, and formulating my thoughts.”

Royal Dutch has bid $45 a share, which it calls “full and fair,” the same description it had for its initial $40-a-share offer last October. Royal Dutch wants complete control of Shell Canada to increase its holdings in the Alberta oil sands, with an eye to process raw bitumen from the province in the United States and internationally, rather than in this country as Shell Canada had planned.

CIBC World Markets calculated Shell Canada’s share value at between $42 and $48. Shell Canada’s oil sands assets, led by the Athabasca operation, comprised more than 60 per cent of the total.

ƒè Some minority shareholders believe Shell Canada is worth $50 or more a share, citing extensive oil sands holdings, and other long-term assets including a large natural gas field in the Mackenzie Delta. Owners of at least 20 per cent of the minority shares have said they will not sell at $45, suggesting they’d go to court to protect their position.

“We’d be quite happy sitting back and reaping the benefits [of owning Shell Canada stock] for the next 10 years,” Dom Grestoni, a senior vice-president at I.G. Investment Management, told The Globe and Mail last month. I.G., along with Jarislowsky Fraser Ltd. and Bissett Investment Management, plan to reject the $45-a-share offer.

Royal Dutch’s offer is open until 8 p.m. ET on March 16 and the firm wants to secure more than half of the minority shares before it proceeds with the takeover. Shell Canada’s board of directors has endorsed the offer, but the question is whether enough investors will tender.

According to the takeover bid circular, Royal Dutch resisted raising its $40-a-share offer for several months, a position presented by Adrian Loader, a Royal Dutch director that led talks on behalf of Jeroen van der Veer, Royal Dutch chief executive officer.

On Dec. 6, Derek Burney, lead director of Shell Canada’s board, told Mr. Loader that $40 was not acceptable.

After several exchanges, some by e-mail, Mr. Loader on Jan. 18 “mentioned that Royal Dutch might be prepared to discuss a possible increase … to $43.50.”

The next day, Mr. Burney told Mr. Loader that the suggestion “was not favourably received” by a special committee of Shell Canada’s board.

However, the indication of a higher offer quickly pushed the talks into what ended up being the final stages. By Jan. 22, a Monday, Shell Canada told Royal Dutch that $45 a share in cash would work, a deal that was formalized and announced by the next morning.

Until last Thursday, Shell Canada stock traded above $45 on the Toronto Stock Exchange, indicating some investors thought another increased bid could emerge. Then Mr. van der Veer told Royal Dutch shareholders on an earnings conference call that the company would “move on” if the $45 a share bid failed. “It is now for the minority shareholder to make up their mind,” he said.

Shell Canada stock sunk suddenly, sliding below $45 and it has remained there, yesterday closing at $44.82, down 5 cents and its sister websites,,,,, and are all owned by John Donovan. There is also a Wikipedia article.

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