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Shell plays tough with BHP over Woodside deal



Woodside liquefied natural gas platform in the Timor Sea Source: The Australian

Matt Chambers April 11, 2011

ROYAL Dutch Shell is playing hardball on a possible sale of its 24 per cent stake in Woodside Petroleum to BHP Billiton, its local chief declaring yesterday that Shell was in “no hurry” to do a deal.

Speaking on the sidelines of a conference in Perth last night and ahead of this week’s annual Australian Petroleum Production & Exploration Association meeting, Shell Australia chair Ann Pickard moved to hose down reports out of London at the weekend that a sale of its stake in the Perth-based oil and gas company was imminent.

“There are no commercial discussions,” Ms Pickard said, choosing her words carefully. “I’m not in a hurry to do anything. Woodside is a great company.” She declined to elaborate on whether any discussions had already taken place.

Her comments come amid speculation that BHP, the world’s largest miner, is preparing to launch Australia’s biggest ever takeover bid for Woodside.

It came as Ms Pickard shared a stage in a curtain-raiser to the APPEA conference with Woodside chief executive Don Voelte. Mr Voelte said last night he was not aware of any talks. “If I knew anything I would have to tell the (Australian Securities) exchange.”

Reports yesterday from London — where Shell is jointly headquartered — indicated a $46.5 billion tilt for Woodside was could be imminent. London’s Sunday Times reported that BHP was “holding detailed talks” with Royal Dutch Shell.

The speculation of a deal has been running for some weeks, but the stellar run on Woodside’s shares on the back of the speculation could have stymied a move on the company.

Woodside’s share price has jumped 14 per cent to $47.26 in the past 10 days and many petroleum analysts believe the company may now be too expensive.

But in a sign that BHP might try to structure a deal differently, The Sunday Times reported that Shell would give BHP its 24 per cent Woodside stake and in return receive some of the Australian company’s best assets, including the giant Sunrise gasfield.

Once BHP has agreed the deal with Shell, it would launch a full takeover offer for Woodside. UBS is advising Shell on its options.

The deal would be the largest corporate transaction in Australia’s history.

At the speculated price, the bid would be worth twice as much as the current largest deal — the $21.9bn takeover of Coles by Wesfarmers in 2007.

A move on Woodside would mark a significant strategic switch for BHP, which has a cash pile of $16bn built up in the commodities boom that has taken the price of iron ore, copper and oil to record levels. While it already has oil and gas assets, they are small compared with the mining operations.

Both BHP and Woodside refused to comment yesterday on the strengthening speculation.

It would also represent a bold return to the deal-making fray by the group, led by chief executive Marius Kloppers and chairman Jac Nasser. It has attempted three big takeovers in recent years, and failed each time. The most recent came last year, when Canadian regulators blocked a $40bn bid for Potash Corporation of Saskatchewan on the grounds that it was against the national interest.

It is understood that BHP has already taken political soundings on the deal, with private talks with WA Premier Colin Barnett and the federal government.

The response from Mr Barnett is thought to have been negative, while Canberra has given little indication on its stance.

ADDITIONAL REPORTING: THE SUNDAY TIMES

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