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Shell abandons fight for Cove Energy

Mon Jul 16, 2012 3:03pm GMT

By Kate Holton and Sarah Young

LONDON, July 16 (Reuters) – Royal Dutch/Shell on Monday abandoned the battle for control of gas explorer Cove Energy Plc, shocking investors and clearing the way for Thai rival PTT Exploration & Production to acquire it.

Investors had anticipated a higher offer from one or both bidders, prompting hedge funds to buy in to Cove stock, and an auction process had been due to start this week.

PTT is offering 240 pence per share or about $1.9 billion for Cove, which has made huge east African gas finds. Shell had bid 220 pence.

Cove shares closed at 275.5 pence on Friday but after Shell’s shock announcement on Monday they dropped 13 percent on the day to stand just shy of PTT’s offer at 238.5 pence.

“Shell Bidco has today decided not to revise its offer of 220 pence in cash for each share of Cove, and not take part in the auction procedure for Cove,” Shell said in a statement.

It gave no reason for the decision, but analysts have been saying Shell has other ways to secure access to east African gas.

Cove owns an 8.5 percent stake in a Mozambique licence containing some of the big gas discoveries, while U.S. explorer Anadarko has a 36.5 percent stake in the licence.

Analysts have said Shell could turn its attention to a deal with Anadarko should it decide against the Cove deal.

Other points of entry to East Africa for Shell could include tie-ups with Italy’s ENI, which has also found gas in Mozambique, or BG Group and Exxon Mobil, which have discoveries off the coast of Tanzania. The rival bidders had been heading into the first formal takeover auction for a listed British company since 2008 after a five-month bidding war.

Britain’s takeover watchdog ruled on Friday that if neither suitor had declared its current offer final before 1600 GMT on Monday, an auction would start the next day. That could have involved bids submitted to daily deadlines until a winner was found.

The two companies have been battling to buy Cove since February.

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