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Globe & Mail (Canada): Investors denounce valuation of Shell

Saturday 10 February 2007

CALGARY — Minority shareholders of Shell Canada Ltd. have criticized an independent valuation of the company conducted as part of Royal Dutch Shell PLC.’s takeover bid, and said they are still hopeful that the offer won’t succeed.

Royal Dutch Shell is offering $45 a share or $8.7-billion for the 22 per cent of Shell Canada it doesn’t already own. A takeover bid circular issued late Thursday showed that CIBC World Markets Inc., hired by Shell Canada, valued the company at between $42 and $48 a share.

Len Racioppo, president of Jarislowsky Fraser Ltd., a large Shell Canada shareholder, questioned several of the assumptions made in the valuation and was particularly unimpressed with the value of 25 cents a share placed on the company’s undeveloped offshore and northern holdings.

“That’s an incredibly low number,” Mr. Racioppo said. “I think it’s absurd.”

The Royal Dutch offer is open until March, 16, and is contingent on the company getting more than 50 per cent of the minority shares.

Jarislowsky, I.G. Investment Management and Bissett Investment Management, which together hold at least 20 per cent of the minority shares, think Shell Canada is worth at least $50 a share and don’t plan to tender their holdings, saying yesterday, that there could be enough dissent to derail the deal.

“I would suggest we could indeed be successful,” Mr. Racioppo said. “It will be very close.”

Last week, Royal Dutch threatened to walk away if it is not successful with its $45 bid, which analysts say could push the stock back down to around $35.

Dom Grestoni, a senior vice-president at I.G., said the threat is a “pretty pathetic” attempt to get investors to sell their stock and said he also thinks the bid could fall short.

“If I had to guess right now I don’t think they’ll get 50 per cent of the minority,” Mr. Grestoni said.

Royal Dutch first bid $40 a share for Shell Canada last October, which was increased on Jan. 23. The offer was endorsed by Shell Canada’s board after talks between the two companies resulted in the higher bid.

While some minority shareholders believe Shell Canada is worth more than Royal Dutch is offering, a number of analysts say the valuation is fair. Martin Molyneaux of FirstEnergy Capital Corp. told Reuters News Agency yesterday that he thinks $45 a share is “full and fair value.”

UBS Securities, in a report yesterday, said the offer was fair “based on fundamentals” but added that “there is still a chance that sufficient investors hold out for a higher value.” UBS analyst Andrew Potter said $1 or $2 a share more “would likely be sufficient.”

Shell Canada’s all-time high share price is $47.19, reached in early 2006.

Shell closed at $44.87 on the Toronto Stock Exchange yesterday, up 5 cents or 0.1 per cent. With the stock below the bid price, it suggests investors feel a higher bid is still unlikely.

Royal Dutch, one of the world’s biggest public oil companies, wants to buy the rest of Shell Canada to increase its exposure to the oil sands. Investors have speculated that Royal Dutch might pursue Western Oil Sands Inc. if it closes the Shell Canada deal. Western owns 20 per cent of the Athabasca oil sands project. and its sister websites,,,,, and are all owned by John Donovan. There is also a Wikipedia article.

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