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Bloomberg: Shell Wins Control of Canada Affiliate, Will Complete Takeover

By Dan Lonkevich and Ian McKinnon

March 18 (Bloomberg) — Royal Dutch Shell Plc said it acquired through a tender more than half the shares of Shell Canada Ltd. that it doesn’t already hold, giving it enough to proceed with its plan to take full ownership of the affiliate.

A total of 97 million shares were tendered at C$45 ($38.26) each, representing 53.1 percent of the shares Hague-based Shell didn’t already own, the company said in a statement yesterday. That met Shell’s requirement that 50 percent must be tendered, so the company will complete the purchases and extend the offer for the rest of the shares until March 30.

“I think they held all the cards for this deal,” Greg Eckel, a senior vice president at Toronto-based Morgan Meighen & Associates, said before the statement was issued. “No one else can come along and take it.”

Morgan Meighen, which manages about C$1.3 billion, held as many as 270,000 Shell Canada shares and sold them on the open market after Shell announced the tender, Eckel said.

Shell, Europe’s biggest oil company, already owned about 78 percent of Shell Canada stock. With the tendered shares, that rises to 89.6 percent. Under Canadian law, once a buyer in a tender acquires at least 90 percent of all outstanding shares, any holdouts must agree to tender their shares.

Shell increased its offer for Shell Canada on Jan. 23 to C$45 from C$40 a share. Shell Canada shares closed at C$44.68 on March 17 in trading on the Toronto Stock Exchange, a gain of 9.4 percent in the past year.

Oil Sands

Shell Chief Executive Officer Jeroen van der Veer wants the rest of Shell Canada’s shares to gain control of the reserves in the company’s oil-sands properties in Alberta that it doesn’t already claim. “This is a positive outcome, and a further step towards building on our strong position in Canada,” he said in the statement.

Shell Canada is expanding its Athabasca Oil Sands Project with partners Chevron Corp. and Western Oil Sands Inc. The partners have decided to add 100,000 barrels a day to the existing output of 155,000 barrels a day and may eventually boost the size of the project to 770,000 barrels a day.

“Shell will have full control of oil sands in the Athabasca, and the reserves there are very big,” said Antoine Leurent, an analyst at KBC Securities in Paris who rates Shell shares at “accumulate” and owns none. “After the scandal over inflating their reserves, they need to show can replace reserves,” he said, referring to 2004, when Shell admitted it had overstated its oil and gas holdings.

Canada’s oil sands may contain 175 billion recoverable barrels of oil, second only to reserves in Saudi Arabia. Shell agreed in December to give up half its stake in Russia’s Sakhalin-2 venture to state-run OAO Gazprom, dealing a blow to van der Veer’s efforts to find new deposits.

To contact the reporter on this story: Dan Lonkevich in New York at [email protected] ; Ian McKinnon in Calgary at [email protected] .

Last Updated: March 18, 2007 16:46 EDT

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