Oil giants set for battle to acquire Cove Energy

OIL GIANT Shell and Thai rival PTT could be heading into the first formal takeover auction for a listed British company since 2008 as they battle for Dublin-based Cove Energy and its stakes in huge new east African gas finds.

Britain’s takeover watchdog ruled yesterday that if neither suitor declared its current offer final before 4pm on Monday, an auction would start the next day, which could mean them submitting bids to daily deadlines until a winner emerges.

The ball is in Shell’s court after its $1.8 billion, or 220 pence a share, bid for Cove was trumped by a $1.9 billion, or 240p a share, offer from Thailand’s PTT Exploration and Production in May. Investors are betting the Anglo-Dutch group will raise its bid before a Tuesday afternoon deadline, and believe it has the fire-power to win the five-month battle.

East Africa is set to become one of the world’s largest gas exporters, supplying energy-hungry Asia with liquefied natural gas, a gas market in which Shell is one of the world’s biggest and most experienced players.

“Both Shell and PTT really need Cove very badly. But Shell has more fire-power than PTT, which is quite leveraged and has less means than Shell. We think there’s a good chance [Shell comes back with a higher offer],” said Anne-Sophie d’Andlau, co-founder of Paris-based hedge fund firm CIAM and a small shareholder in Cove.

The battle has encouraged investors to expect a higher offer, with shares in Cove for the last month consistently trading between 10 and 15 per cent higher than PTT’s 240p per share bid.

At 12.30 Irish time, Cove shares were up 0.6 per cent at 275.5p, valuing the firm at about £1.3 billion.

However, some analysts sounded a note of caution, saying that while Shell would be keen to gain a foothold in gas fields off the coast of east Africa, Cove was not its only option. If Shell and PTT do not submit revised offers on Tuesday, their current bids will be regarded as final and there will be no auction.

Cove was established in 2009 when chief executive John Craven headed a team that took control of a listed mining “shell”.

Cove owns an 8.5 per cent stake in a Mozambique licence containing some of the big gas discoveries. – (Reuters)