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Royal Dutch Shell (NYSE:RDSA) has likely just upped the ante on its aggressive moves to acquire Cove Energy (COVE) by extending the deadline for shareholders’ acceptance of its offer of 220 pence per share. According to analysts, this move could be the precursor to a hike in its offer which may go up to 300 pence a share.
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Royal Dutch is engaged in a bidding war with Thailand’s PTT Exploration and Production (PTTE.BK) to acquire Cove, which is partnering U.S. oil firm Anadarko Petroleum Corp (NYSE:APC) in exploring East Africa’s lucrative offshore gas reserves. In fact, Anadarko announced earlier this week its find of a major gas find in the region. Thursday also saw the announcement of a big gas deposit off Tanzania by Statoil (NYSE:STL) and ExxonMobil (NYSE:XOM). These finds point to the region becoming a major source of oil and gas to energy-hungry economies in Asia – this is also an area where Shell is without a presence.
According to Investec analyst Stuart Joyner, “Shell are very keen to get into the East African gas story…it is effectively locked out of the key areas of movement (in East Africa).” An acquisition was the only route to Shell’s entry in the region – “That’s really why they are going for Cove so aggressively,” Joyner said. Cove holds an 8.5 percent stake in Anadarko’s gas finds off the coast of Mozambique.
If Shell does put 300 pence on the table, its offer would value Cove just below 1.5 billion pounds, and according to Joyner the offer could likely put paid to PTT’s bid. “If Shell comes back with a higher offer, that would probably finalize it,” Joyner said. “I don’t see PTT coming back a third time … I would imagine a 300 pence per share offer would probably finalize this.”
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