PTT raises offer in joust with Shell to buy Cove

THAILAND’S PTT Exploration and Production has stoked the bid battle for Cove Energy, topping Royal Dutch Shell with a £1.22 billion offer that underscores interest in new east African gas finds.

Cove shares jumped as much as 11 per cent to 249 pence yesterday, above PTT’s offer of 240 pence a share and signalling investors expect Shell to come back with a higher bid.

East Africa is set to become one of the world’s largest gas exporters, executives operating in the region believe, after a string of major discoveries across Mozambique and Tanzania. This has fuelled speculation of a wave of takeover deals involving companies active there.

Cove has an 8.5 per cent stake in massive gas finds offshore northern Mozambique. Project leader Anadarko Petroleum plans to build large plants to freeze the gas to liquefied natural gas (LNG) for export in ships.

PTT sees Cove as an opportunity to secure energy resources to help power Thailand’s economy. Shell hopes Cove will be a springboard to a major presence in east Africa.

Cove management said hours before a deadline for investors to accept Shell’s bid that it had switched to back the improved offer from PTT. It had previously supported Shell’s offer, which followed a PTT bid that trumped Shell’s opening salvo in February.

Investors said they were now watching to see if the Mozambique government was prepared to support a takeover by PTT, which has not previously built an LNG export plant.

Maputo previously gave the green light to Shell, the market leader in LNG, and some Cove shareholders fear the government might block PTT’s higher bid and favour Shell. “We’re all exposed to the Mozambique government risk now,” said one hedge fund manager holding Cove stock.

Industry executives say they expect a burst of consolidation as larger companies such as Norway’s Statoil, Britain’s BG Group and US-based ExxonMobil, snap up smaller players.

Shell has already said it would like to add other acquisitions to Cove’s Mozambique interest. If it is successful in buying Cove, it is expected to bid for a share of a neighbouring block that Italy’s Eni says it plans to sell. – (Bloomberg)