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The Times: Shell pulls out of $410m deal after Regal chiefs quit

November 24, 2007
Robin Pagnamenta

Royal Dutch Shell has pulled out of a deal, announced just two days ago, to acquire a large stake in the Ukrainian gasfields of Regal Petroleum after Regal appointed a new management team on Thursday.

A Shell spokeswoman said: “We were not expecting it and are deciding not to proceed. Our memorandum of understanding was with the previous management team.”

In a deal that had been considered an encouraging step for Regal, Shell had agreed on Wednesday to invest up to $410 million (£199 million) to acquire 51 per cent of Regal Petroleum’s gasfields in Ukraine and to cover much of the development cost.

However, the next day, Regal unexpectedly announced that John Ritson, its chief executive, and Francesco Scolaro, chairman, had resigned, to be replaced by David Greer, a former Shell executive, who would assume both roles.

Mr Greer resigned from Shell this year after writing a motivational e-mail to staff that later was leaked and widely ridiculed. At Regal, Mr Greer immediately raised questions about the Shell deal.

One source close to the company claimed that Frank Timis, who was convicted in the 1990s for possession of heroin and who controls 20 per cent of the company’s shares, may have orchestrated the termination of the Shell deal.

“Frank didn’t like the deal with Shell – he thought they were getting assets on the cheap,” the source said. “He thought the best way of breaking it was to get rid of the executives who had negotiated it and replace them with two that Shell had got rid of.”

A statement from the Anglo-Dutch oil giant said: “We see from the new management’s comments that they may have changed their thinking on this transaction. Regal have indicated that they would like to review options. Therefore, we have decided not to proceed with the memorandum of understanding with Regal.”

Regal said that it could not comment.

http://business.timesonline.co.uk/tol/business/industry_sectors/natural_resources/article2933481.ece

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