Woodside Petroleum Ltd

Shell has revised its merger proposal with WPL. The cleverly crafted offer is designed to get the revised merger proposal (RMP) in front of the WPL shareholders to force a vote (extraordinary general meeting will be held at the end of April). Shell is offering $14.80 per share (offer period 11 December to 14 January) and an option at a strike price of $14.80 per share. The option will start trading from January 21 to June 30. Shell has stated it will buy the option at 20¢ in the first week of trading. In addition Shell is also offering to transfer net assets worth up to $7.3b to WPL for the issue of 333.3m new WPL shares. The net value to WPL shareholders is $2.5b of assets plus synergy benefits of $0.5b. The asset transfer will only take place If shareholders vote in favour of the RMP. If shareholders accept the RMP option holders would then convert their options and realise the forecast higher value for WPL. The value to be added from merging the group assets with related synergies is around $3 per share. Post the merger WPL would have a value around $16 per share. The theoretical option value assuming a 50% success rate has been estimated at 85¢ per option.