Royal Dutch Shell’s 23.1% stake in Australian oil and gas group Woodside Petroleum is seen as more likely to be split up and/or sold to institutional shareholders than to go in one piece to a strategic buyer

December 27, 2013 Leave a comment

Updated: Friday December 27, 2013 MYT 9:11:08 AM

Woodside stake may be split if Shell sells out

LONDON: Royal Dutch Shell’s 23.1% stake in Australian oil and gas group Woodside Petroleum is seen as more likely to be split up and/or sold to institutional shareholders than to go in one piece to a strategic buyer, bankers said. The holding, worth about US$6.4bil and left over from Shell’s abortive attempt to acquire Woodside in 2001, has long been viewed as non-core to Shell.This year, the Anglo-Dutch company promised to accelerate asset sales to reflate a narrowing cushion between cash inflow and investment spending. Reuters was unable to verify Shell’s intentions for the stake. Shell and Woodside declined to comment on its future.

Bankers say the holding was an obvious sell-off candidate for incoming chief executive Ben van Beurden, who takes the job on Jan 1 and will offer strategy pointers on Jan 30 along with fourth-quarter results.

However, they say, other investor-owned international oil companies big enough to buy it are also in sell-off mode.

Meanwhile, a strategic buyer such as one of China’s top oil companies or the national oil companies (NOCs) of gas-hungry countries such as India or Thailand might be put off by Shell’s experience with the Australian government when it tried to take full control of Woodside in 2001.

“Bidder-wise, it’s a tricky one,” one banker said. “The deal is big enough to require a review by the government, and although Woodside is not as important as it was at the time when Shell’s bid was blocked, it is still the largest independent oil company in Australia, so I don’t think the Chinese NOCs would be welcome.”

The banker suggested Middle Eastern or South-East Asian sovereign wealth funds might be interested, but said Shell probably would not find a buyer among them for the entire stake and would have to sell in small blocks.

The banker predicted Shell would exit via a combination of strategic sales, market placements and probably a share buyback by Woodside.

A second banker said the stake as a single block had been “shopped” to a number of potential strategic buyers without result, and predicted the shares would be spread in the market among institutional investors.

Shell’s interest in the plentiful offshore gas under Australia’s northwest shelf dates back decades and remains strong through its Prelude floating liquefied natural gas (FLNG) project, which will draw gas from below the seabed and process it on board the world’s largest vessel.

The company built a 34% holding in Woodside as part of that interest. — Reuters

Filed under Macro Trends

Unknown's avatarAbout bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

Leave a comment