After a five-month battle to obtain ownership of Cove Energy, Shell has ceased bidding, leaving the way clear for its Thai rival PTT Public Company Limited
In a statement today Shell said, "Shell has decided not to revise its offer of 220 pence (US$3.40) in cash for each share of Cove and not take part in the auction procedure." No explanation was given.
Bidding for the gas exploration company Cove began in February, after it had recently made a major and valuable gas discovery offshore Mozambique.
After months of Shell and PTT repeatedly increasing bids and extending offer deadlines, officials had planned for an auction process to begin tomorrow.
The offer from PTT that finally out-bid Shell was 240 pence (US$3.70), which is equivalent to a value of US$1.9 billion.
Chris Searle, corporate finance partner at accountants BDO LLP, described the decision to drop out of the race for Cove Energy as a brave move by Shell, leaving the field open for PTT to complete its acquisition of the exploration firm.
Searle said, “I’m not too surprised that Shell has dropped out of the auction for Cove, because there is always the danger in these situations of the price for an attractive asset being bid up in the auction process with the result that the eventual winner overpays, although this will only become apparent with hindsight.
“Remember, though, that there are other companies that partner with Cove in the Rovuma field and I wouldn’t be surprised if Shell went after one of these in some way, whether via an acquisition or some other arrangement.”
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