Oil giant Royal Dutch Shell Plc (RDS-A, RDSA.L, RDSB.L, RDS-B) on Tuesday said it has agreed to buy Cove Energy Plc (COV.L, CNVGF.PK), which operates in East Africa, in a sweetened cash deal of 1.12 billion pounds (about $1.8 billion). Shell said the acquisition is a strategic fit for sustainable and profitable growth and would also mark its entry into exciting new hydrocarbon provinces in Mozambique and Kenya.
Shell's Dutch unit Shell Exploration and Production (XL) B.V. would make a recommended cash offer of 220 pence per share in cash.
It was on February 22 that Shell Exploration made a possible offer of 195 pence per share in cash, valuing Cove at about 992.4 million pounds. Cove was waiting to get a firm offer from Shell to recommend it.
The revised per-share price represents a premium of 42.4 percent to Cove's Friday's closing price of 154.5 pence per share and 134 percent to Cove's closing price on December 12, 2011, the last business bay before Cove said it proposes sale of the Rovuma Area 1 interest.
The Cove Directors intend to recommend the offer unanimously to its shareholders. Cove noted that the proposed sale is in line with its long term strategy, as set out in May 2009, of delivering value to shareholders through exploration and appraisal.
Shell's offer is conditional upon, among other things, the consent of the Republic of Mozambique's Minister of Mineral Resources.
Meanwhile, PTT Exploration and Production Public Co. Ltd., which made a cash offer to Cove on February 24, noted it is currently considering its options and will make a further announcement as and when appropriate.
Shell, whose East African interests are currently restricted to Tanzania, said the latest addition would give it significant potential for new LNG from recent gas discoveries offshore Mozambique. It would also give further complementary exploration positions in East Africa, a major prospective hydrocarbon province that has seen a significant increase in exploration activity in recent years.
On February 21, Cove Energy announced the divestment of its interest in the Mnazi Bay Concession in Tanzania to Wentworth Resources Ltd. (WRL.L) in a transaction that also saw the termination of a 4.95 percent royalty from the Rovuma block, thus increasing Cove Energy's profit share from the Mozambique resource.
Shell intends to finance the offer from its existing resources. Cove has also agreed to pay Shell a break fee of 11.14 million pounds in case of a competing offer.
In the offer, Morgan Stanley is acting as financial adviser to Shell.
In London, Shell's A shares are currently trading at 2,120 pence, up 10 pence or 0.47 percent and B shares are at 2,188 pence, up 8.50 pence or 0.39 percent.
Cove shares are currently trading at 224.94 pence, up 7.94 pence or 3.66 percent.
by RTT Staff Writer
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