Financial Post (Canada): Shareholders to decide on buyout of Shell Canada

Lisa Schmidt, CanWest News Service
Published: Thursday, March 15, 2007

CALGARY — The future of Shell Canada Ltd. could be decided Friday with an $8.7-billion buyout offer from its parent Royal Dutch Shell PLC set to expire.

Shell Canada minority shareholders have until this evening to tender their shares, although Royal Dutch still has the option to extend or increase the bid.

The offer is conditional on a majority of Shell Canada’s minority shareholders accepting the $45-a-share bid, which has been supported by Shell Canada’s board of directors.

In January, the Hague-based energy giant raised its bid from its October offer of $40 a share — or about $7.7-billion — for the 22% of shares it does not already own as it seeks to gain a larger stake in Alberta’s burgeoning oilsands business.

Royal Dutch has since held firm, saying it would walk away from the bid if minority shareholders do not accept its sweetened offer. CIBC World Markets, hired by Shell Canada directors to evaluate the minority takeout bid, values its shares between $42 and $48, according to the bid circular.

Chief financial officer Peter Voser said again Wednesday that Royal Dutch will not raise its offer, adding the company has numerous drilling projects it could pursue to increase production.

Some Shell Canada investors said they were disappointed with the revised offer, saying it does not reflect all of the company’s prospects. Shell is also a major natural gas producer and oil refiner in Canada and operates a national chain of gasoline stations.

Len Racioppo, chief investment officer at Jarislowsky Fraser in Toronto, has said he values Shell Canada’s stock at $50 a share and is “prepared to stay and grow” with the company. 

Other investors contacted Thursday declined to comment on the outcome of the tender offer.

The stock has risen about 37% since Royal Dutch launched its initial bid, trading as high as $45.37 in late January following the revised offer.

On Thursday, shares of Shell Canada closed up seven cents $44.60 on the Toronto stock exchange. “It’s trading like it’s going to go through. It’s a reasonable bid,” said Tom Ebbern, an analyst with Tristone Capital in Calgary.

“I think it probably goes through.”

Royal Dutch has been looking for new sources of oil and gas after an accounting scandal in 2004 forced the company to repeatedly write down its reserves. The company has said the move will increase resources to develop oilsands holdings and simplify its North American operations.

If the buyout goes through, the acquisition would turn Shell Canada into a wholly owned subsidiary, like its U.S. counterpart, Shell Oil Co. That could lead to some Canadian jobs being eliminated as Royal Dutch moves to consolidate operations.

Royal Dutch raised eyebrows last year after spending nearly $500-million in oilsands leases in northern Alberta under a new subsidiary called SURE Northern.

Shell Canada owns a majority stake in the Athabasca Oil Sands Project, Canada’s third major mining project near Fort McMurray, which produces 155,000 barrels of oil per day with plans to expand by another 100,000 bpd.

The company plans to eventually boost oilsands production to 770,000 barrels a day.

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