Cove Energy Accepts $1.8B Takeover Offer From Royal Dutch Shell

on April 24 2012 12:16 PM
Royal Dutch Shell logo
The Royal Dutch Shell logo Reuters

Britain's Cove Energy PLC (LON: COV), which owns part of a massive natural gas field off the coast of Mozambique, said Tuesday it accepted a sweetened takeover offer of £1.12 billion ($1.8 billion) from a unit of Anglo-Dutch energy giant Royal Dutch Shell PLC (AMS: RDSA).

London-based Cove Energy PLC holds an 8.5 percent stake in Mozambique's huge Rovuma offshore natural gas basin, a 2.6 million-acre property that holds trillions of cubic feet of natural gas and is being developed as a liquid natural gas project for Asian markets.

The $1.8 billion offer is up from an earlier Royal Dutch Shell offer of $1.6 billion.

If the deal announced Tuesday goes through, it will mean Royal Dutch Shell has beaten state-controlled Thai company PTT Exploration & Production PLC in a bidding war for Cove Energy. It also will mark Royal Dutch Shell's entrance into Mozambique and Kenya, where Cove Energy holds other interests.

Anadarko Petroleum Corp., which is based in The Woodlands, Texas, operates the Rovuma property with a 36.5 percent working interest. Anadarko estimates that Rovuma holds as much as 30 trillion cubic feet of recoverable natural gas resources.

Besides Anadarko and Cove Energy, other partners are Mitsui E&P Mozambique Area 1 Ltd. with a 20 percent interest, BPRL Ventures Mozambique BV with a 10 percent stake, Videocon Mozambique Rovuma 1 Ltd. with a 10 percent stake. Mozambique's Empresa Nacional de Hidrocarbonetos EP has a 15 percent interest.

The announcement of the deal between Shell and Cove does not necessarily mean an end to the bidding for the company, though. And it remains to be seen whether PTT Exploration will raise its bid for Cove, or if Indian companies ONGC and Gail India, which have both previously expressed interest in buying Cove, will make new counter-offers.

The bidding process for Cove has been complicated by a lack of clarity on how the Mozambique government would apply capital gains tax to the sale of Cove's assets there. However, the government did confirm to Cove earlier in April that it would apply a 12.8 percent tax to its assets, the Financial Times reported. The confirmed capital gains tax rate may further encourage counter bids to buy Cove.

Cove Energy shares close up 4.17 percent. Royal Dutch Shares, which trade in London and Amsterdam, closed up slightly.