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MarketWatch: Shell would face tough hurdles in any bid for Australia’s Woodside

By Alex Wilson
Last Update: 5:26 AM ET Jun 18, 2007

MELBOURNE (MarketWatch) — Any fresh takeover bid by Royal Dutch Shell PLC (RDSB.LN) for Australian oil and gas producer Woodside Petroleum Ltd. (WPL.AU) would face stiff regulatory and price hurdles, analysts said Monday.

Shell’s 2001 takeover bid for Woodside was thwarted by Australian Treasurer Peter Costello and the Foreign Investment Review Board on national interest grounds.
The oil and gas major retains a 34% stake in Woodside and has in recent months conducted studies into the feasibility of a fresh bid, people familiar with the matter said.

Australian analysts are skeptical about the prospect of a new bid, saying Woodside is already expensive and regulatory hurdles remain in place.

“The barriers they ran into last time on national interest remain to be resolved,” Morgan Stanley analyst Stuart Baker said.

Baker said there would need to be a change of government at the upcoming election to give a bid a chance and even then the new government would need a compelling reason to approve a deal which has already once been rejected by FIRB.

Shell would be negligent not to keep a watching brief on a possible Woodside deal, Baker said, but at the current share price of A$45.79 the Australian company looks prohibitively expensive.

“You would be hard pressed to find value where the share price is today, but that doesn’t always stop M&A,” he said.

ABN Amro analyst Aiden Bradley said it was hard to see how Shell could justify a bid offering a premium at current prices when last time around it offered A$14.80 a share.

“Could you really afford to pay A$55 for Woodside?” he asked.

One senior investment banker who declined to be named said there was “no chance” of a successful bid and that the national interest issues over gas reserves had, if anything, intensified since 2001.

Woodside has a share along with Shell in Australia’s biggest resources project, the North West Shelf liquified natural gas joint venture in Western Australia.

The Perth-based company has a sizable footprint in the gas-rich northwest of Western Australia and is expected to soon give the green light to its 100% owned Pluto LNG project with Browse further to the north and Greater Sunrise in the Timor Sea set to follow.

People familiar with the situation say Shell is aware that a bid made before this year’s election would likely be rejected, with strong public opposition likely in Western Australia where several marginal seats hang in the balance.

Another option that has been explored is to let a third party acquire Woodside on the condition that Shell wins some of the assets.

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