Show us the money Shell
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Tuesday, 12 December, 2000 - 21:00
CYCLONE Sam was a breeze for Woodside directors compared with the battening down of the hatches they have to do to see off Royal Dutch/Shell. Stage one of the two-stage bid opened this week, with 42,000 shareholders being offered $14.80 a share and that devilishly cunning free call option. Woodside’s valuation statement to support its assertion that the price is inadequate is due out on December 22. Advisers to both parties will be deprived of their Christmas and New Year beach holidays, but their fat juicy fees will make it worthwhile.
Before the bid becomes too complex in investors minds it is worth remembering a few simple things. The current 34.3 per cent Shell shareholding entitles it to nothing more than three directors on the board, and the washroom key. They say they want to raise their stake to 56 per cent. In fact, if enough acceptances come through to take the holding to 50.1 per cent, control changes hands right there. Woodside managing director John Akehurst would be asked if he would like to pursue other interests, and the men from London and the Hague would activate their plans to set the hugely valuable and unique group on a radically changed course. The call option is a device dangled in front of major institutions which can only be exercised if Shell’s offer to inject $7 billion worth of assets into Woodside in return for shares gets up in the vote. Cutting through the flim flam, it means “lend us some shares mate so we can grab control without paying the full whack”.
Shell has been putting about the notion that it is in their interest to keep Woodside as a separate listed entity, because it could keep flying the Australian flag, and continue the close relationships established with present and future LNG customers. You can rest assured the principles of corporate ownership are well understood in Tokyo, Beijing and Seoul. They would know the not-so-little Aussie battler had become just a unit of the Anglo-Dutch colossus.
Foreign customers like supply diversity, in addition to geographical spread and political stability. Remember the fuss Japanese steel mills created before Rio Tinto gobbled up North?
Chinese Premier Jiang Zemin virtually endorsed Australia as the preferred supplier of long terms contracts for LNG when he visited here last year. Woodside is leading a consortium in tendering for a $1.2 billion LNG terminal which the Chinese National Offshore Oil Corp is establishing in Guandong, Southern China. The consortium that wins would be in the box seat to clinch 20-year contracts for over 3 million tonnes a year of LNG. Shell is one of the other bidders.
The WA government has made it bluntly clear that it would like to see the Shell proposal sunk deep off the North West Shelf. Premier Richard Court believes no other country in the world would allow such a strategic energy jewel to fall into foreign hands. He may well be right. Certainly if the fate of Woodside is not a matter of national interest, it would be difficult to imagine what would be. The takeover offer automatically lapses if it gets the thumbs down from the Foreign Investment Review Board. We do not hear much from this body, which lives in a lair deep in the Treasury. The FIRB prefers the discreet cough to the blunderbuss employed by Allan Fels at the ACCC. It dickered around for ages looking at the abortive De Beers bid for Ashton Mining and we were none the wiser. This time we would need to know exactly what advice it gives Treasurer Peter Costello and why.
The power struggle will drag on well into the second half of next year. Strategically that should work in Woodside’s favour. The company has played its cards well in recent weeks. The jumbo $940 million 2000 profit forecast was well received, although it included $104 million booked from the sale of 10 per cent of Greater Sunrise to Osaka Gas. More oil is bubbling up all the time in WA271 permit area. The surprise cooperation agreement with Philips Petroleum will further accelerate gas recovery. Other announcements are coming thick and fast. They will include confirmation that train number 4 will be pulling out of the station, and perhaps news of the discussions with Korean and Chinese buyers that would underwrite trains 5 and 6.
The value of the company has been significantly enhanced, On the day before the latest offer, rumours of an $18 a share plain vanilla cash bid were going the rounds. That sounds more like an appropriate premium for control and would certainly win the day. Show us the money Shell!
Before the bid becomes too complex in investors minds it is worth remembering a few simple things. The current 34.3 per cent Shell shareholding entitles it to nothing more than three directors on the board, and the washroom key. They say they want to raise their stake to 56 per cent. In fact, if enough acceptances come through to take the holding to 50.1 per cent, control changes hands right there. Woodside managing director John Akehurst would be asked if he would like to pursue other interests, and the men from London and the Hague would activate their plans to set the hugely valuable and unique group on a radically changed course. The call option is a device dangled in front of major institutions which can only be exercised if Shell’s offer to inject $7 billion worth of assets into Woodside in return for shares gets up in the vote. Cutting through the flim flam, it means “lend us some shares mate so we can grab control without paying the full whack”.
Shell has been putting about the notion that it is in their interest to keep Woodside as a separate listed entity, because it could keep flying the Australian flag, and continue the close relationships established with present and future LNG customers. You can rest assured the principles of corporate ownership are well understood in Tokyo, Beijing and Seoul. They would know the not-so-little Aussie battler had become just a unit of the Anglo-Dutch colossus.
Foreign customers like supply diversity, in addition to geographical spread and political stability. Remember the fuss Japanese steel mills created before Rio Tinto gobbled up North?
Chinese Premier Jiang Zemin virtually endorsed Australia as the preferred supplier of long terms contracts for LNG when he visited here last year. Woodside is leading a consortium in tendering for a $1.2 billion LNG terminal which the Chinese National Offshore Oil Corp is establishing in Guandong, Southern China. The consortium that wins would be in the box seat to clinch 20-year contracts for over 3 million tonnes a year of LNG. Shell is one of the other bidders.
The WA government has made it bluntly clear that it would like to see the Shell proposal sunk deep off the North West Shelf. Premier Richard Court believes no other country in the world would allow such a strategic energy jewel to fall into foreign hands. He may well be right. Certainly if the fate of Woodside is not a matter of national interest, it would be difficult to imagine what would be. The takeover offer automatically lapses if it gets the thumbs down from the Foreign Investment Review Board. We do not hear much from this body, which lives in a lair deep in the Treasury. The FIRB prefers the discreet cough to the blunderbuss employed by Allan Fels at the ACCC. It dickered around for ages looking at the abortive De Beers bid for Ashton Mining and we were none the wiser. This time we would need to know exactly what advice it gives Treasurer Peter Costello and why.
The power struggle will drag on well into the second half of next year. Strategically that should work in Woodside’s favour. The company has played its cards well in recent weeks. The jumbo $940 million 2000 profit forecast was well received, although it included $104 million booked from the sale of 10 per cent of Greater Sunrise to Osaka Gas. More oil is bubbling up all the time in WA271 permit area. The surprise cooperation agreement with Philips Petroleum will further accelerate gas recovery. Other announcements are coming thick and fast. They will include confirmation that train number 4 will be pulling out of the station, and perhaps news of the discussions with Korean and Chinese buyers that would underwrite trains 5 and 6.
The value of the company has been significantly enhanced, On the day before the latest offer, rumours of an $18 a share plain vanilla cash bid were going the rounds. That sounds more like an appropriate premium for control and would certainly win the day. Show us the money Shell!