London, England — 13 July 2012 – Oil giant Shell and Thai rival PTT could be heading into the first formal takeover auction for a listed British company since 2008 as they battle for Cove Energy and its stakes in huge new east African gas finds.
Reuters reports that Britain’s takeover watchdog ruled today that if neither suitor declared its current offer final before 1600 GMT on Monday, an auction would start the next day, which could see them submit bids to daily deadlines until a winner is found.
The ball is in Shell’s court after its US$1.8 billion, or 220 pence a share, bid for Cove was trumped by a US$1.9 billion, or 240 pence a share offer from Thailand’s PTT Exploration and Production in May.
Investors are betting the Anglo-Dutch group will raise its bid before a deadline, and believe it has the firepower to win the five-month battle.
East Africa is set to become one of the world’s largest gas exporters, supplying energy-hungry Asia with liquefied natural gas (LNG), a gas market in which Shell is one of the world’s biggest and most experienced players.
“Both Shell and PTT really need Cove very badly. But Shell has more firepower than PTT, which is quite leveraged and has less means than Shell. We think there’s a good chance Shell comes back with a higher offer,” said Anne-Sophie D’Andlau, co-founder of Paris-based hedge fund firm CIAM and a small shareholder in Cove.
The battle has encouraged investors to expect a higher offer, with shares in Cove for the last month consistently trading between 10 and 15% above PTT’s 240 pence per share bid.
At 1130 GMT today, Cove shares were up 0.6% at 275.5 pence, valuing the firm at about £1.3 billion. However, some analysts sounded a note of caution, saying that while Shell would be keen to gain a foothold in gas fields off the coast of East Africa, Cove was not its only option.
If Shell and PTT don’t submit revised offers on Tuesday, their current bids will be regarded as final and there will be no auction.