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The Globe & Mail: Shell parent’s takeover bid will be ‘close’

Royal Dutch’s $8.7-billion offer for rest of its Canadian unit expires tonight

Friday, March 16, 2007 Page B3

CALGARY — Royal Dutch Shell PLC’s $45-a-share offer for Shell Canada Ltd. expires tonight, and several investors say the takeover attempt will be a close call.

Royal Dutch, one of the world’s biggest public energy companies, already owns about 78 per cent of Shell Canada and wants to buy the rest, saying its offer is contingent on getting more than half of the minority shares.

“It’s going to be close,” said Len Racioppo, president of Jarislowsky Fraser Ltd., one of Shell Canada’s largest shareholders who has said $45 is not enough and refuses to tender its shares.

The Royal Dutch offer — worth a total of $8.7-billion — expires at 8 p.m. but could be extended.

Several minority shareholders, led by Jarislowsky, have stated their opposition to the deal. They hold at least 20 per cent of the shares that Royal Dutch is looking to buy.

What is not known is how many hedge funds, generally short-term shareholders, have picked up stock since Royal Dutch made its first bid for Calgary-based Shell Canada at $40 a share in October, an offer described by the bidder as “full and fair.” The bid was increased to $45 in January, and that was again described as “full and fair” by Royal Dutch, and was endorsed by Shell Canada’s board of directors.

Royal Dutch wants the rest of Shell Canada so that the Anglo-Dutch company can increase its oil sands holdings.

Shell Canada shares closed at $44.60 on the Toronto Stock Exchange yesterday, suggesting investors don’t think a bid higher than $45 is coming. After the $40 bid, Shell Canada stock traded higher than that mark, which suggested an increased bid would emerge.

An investor at a hedge fund in New York said yesterday that people holding between 20 and 40 per cent of the minority shares are ready to sell to Royal Dutch.

“The sense I get is that the New York hedge-fund community is tendering to the offer,” the investor said. “But people are worrying that the Canadian shareholders are going to vote it down. There’s definitely a worry.”

Analysts estimate that Shell Canada stock would plummet toward $30 if Royal Dutch were to walk away, which it has said it would do if it doesn’t get enough shares.

For current Shell Canada investors, holding out in hopes of getting more than the $45 bid could be vastly outweighed by the potential loss if the stock price were to fall sharply should the deal fall through.

However, investors such as Jarislowsky believe there is compelling, long-term value in Shell Canada over the next decade, and see $45 a share as an unreasonably low offer.

One investor in Toronto said yesterday that he expects the opposing shareholders will lose. Capital Research & Management Co., the large and extremely private Los Angeles investor, is believed to be in favour of the Royal Dutch offer. Capital Research is the largest shareholder of Royal Dutch and among the largest Shell Canada investors.

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