Shell Unloads Huge Stake in Woodside Petroleum

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James Paton and David Fickling

June 17 (Bloomberg) — Royal Dutch Shell Plc, Europe’s largest oil company, is selling most of its 23 percent stake in Woodside Petroleum Ltd. for about $5 billion after tax in Australia’s biggest energy assets’ deal.

Shell is selling 78.3 million Woodside shares to investors, while the Australian company also plans to buy back the same amount of stock from Shell, The Hague-based company said today in a statement. That’s about 19 percent of Woodside.

The exit comes as Shell Chief Executive Officer Ben van Beurden has pledged to speed asset sales to free up cash for new projects after taking over from Peter Voser this year. Woodside Chief Executive Officer Peter Coleman, who scrapped a deal last month to invest as much as $2.6 billion in an Israeli natural gas project, said today on a call that the buyback won’t affect his company’s capacity to pursue acquisitions.

“Woodside is master of its own destiny without that encumbrance,” Tim Schroeders, portfolio manager at Pengana Capital Ltd. in Melbourne who helps oversee about A$1.2 billion ($1.1 billion), said today by phone. “This breaks up an overhang people have been aware of for a long time and allows both companies to move forward with their own strategies.”

Woodside, which closed yesterday at a three-year high of A$42.85, was halted in Sydney trading. The company, Australia’s second-largest energy producer, has a stock market value of about A$35.3 billion.

Not Strategic

Shell flagged last year that it would eventually sell its holding in Woodside because it was no longer strategic. Coleman pressed Shell in February to take action, saying investors wanted “certainty.”

With a pre-tax sale price of about $5.7 billion, the Shell deal is bigger than ConocoPhillips’s accord in 2008 to make an up-front $5 billion payment to Origin Energy Ltd. for 50 percent of the Sydney-based company’s coal-seam gas unit.

The transactions follow Shell’s sale of a 10 percent stake in Woodside in November 2010 at A$42.23 a share. It’s new stake will drop to a maximum of 4.5 percent.

Shell’s plan to exit from Woodside has sparked speculation that the Australian company may become an acquisition target. BHP Billiton Ltd., Malaysia’s Petroliam Nasional Bhd., or Brazil’s Petroleo Brasileiro SA could all be potential suitors for Woodside, Peter Esho, managing partner at wealth management firm 100 Doors, said by phone from Sydney.

“It’s one of the few producers that has a mix of geographical attractiveness, low sovereign risk, developed and proven assets and direct leverage to energy prices,” he said.

Shell’s sale will allow shareholders to fully value Woodside, Coleman said today on a call with analysts.

‘Resolving Uncertainty’

“We’re certainly not thinking about setting the company up for a takeover,” Coleman said.

In 2001, the Australian government blocked Shell’s takeover bid for Woodside. At the time, Woodside ran Australia’s only LNG plant and the government was concerned Shell would slow Woodside’s expansion by prioritizing other investments in Asia.

Shell has hired two investment banks to sell 78.3 million Woodside shares, or about 9.5 percent of the Australian company, at A$41.35 each, about a 3.5 percent discount to yesterday’s close. Woodside agreed to buy back the same number of shares for A$36.49 each, a 15 percent discount.

The transactions will “resolve the uncertainty in relation to Shell’s shareholding that has existed for several years,” Coleman said today in a statement.

Copyright 2014 Bloomberg.