Shell to buy Cove Energy for $1.6 billion
A Shell filling station
Shell has made an agreed £992.4 million ($1.6 billion) bid for Cove Energy, offering a full price to open up a new gas frontier for the Anglo-Dutch oil major in East Africa.
Shell has offered 195 pence per share in cash, which Cove's directors said on Wednesday they would recommend to shareholders.
On Tuesday, Cove's shares closed at 154.5 pence, and analysts at Citigroup said the "valuation looks stretched" in a research note.
The price is an over 70 per cent premium to Cove's closing share price on January 4, when Cove announced plans to sell, although investors were already betting on a bid at that point.
Cove's main asset is an 8.5 per cent stake in the Rovuma Offshore Area 1, in Mozambique, where operator Anadarko has found over 30 trillion cubic feet of natural gas.
Nearby, Italy's Eni has also made major gas finds while, north of the maritime border, Norway's Statoil has made a find in Tanzanian waters.
Shell is the industry leader in freezing natural gas into liquefied natural gas (LNG) for export in tankers around the world, and so a presence in what is expected to emerge as one of the world's major LNG provinces is a logical step.
However, some bankers had questioned whether Cove's stake alone would make sense for an oil major like Shell. Big oil groups like to have material stakes of over 25 per cent in projects.
In addition to Anadarko, Japan's Mitsui and Indian groups Bharat Petroleum and Videocon own minority stakes in the Rovuma license, and the values of these interests could now be marked up.
Cove also has interests in Tanzania and Kenya.
Morgan Stanley advised Shell on the bid, while Standard Chartered advised Cove.
"This issue we honour a national hero, and the subject of Benedict Cumberbatch's latest film, codebreaker Alan Turing"
- Snooper's charter ‘dead and buried’ but police to get new Internet powers
- Complex cyber-spying malware uncovered by researchers
- Hackers access thousands of web cams as passwords weak
- Volcanic ash detector fitted to long-haul jet
- Hacking major threat to driverless vehicle adoption
- Scientists give LEDs a warm glow
- What to Specialise in Electronics Engineering?? [03:02 am 03/04/14]
- Britain to have just one remaining coal pit by the end of 2015 [01:11 am 03/04/14]
- LV Generator Star point earthing - UK [08:35 pm 02/04/14]
- East West Rail - the Oxford to Bedford route [07:33 pm 02/04/14]
- Small nuclear power [06:06 pm 02/04/14]
The essential source of engineering products and suppliers.