Thursday, February 17, 2011

Shell’s Selloff in Woodside Hits Sydney

By Ross Kelly

Woodside Petroleum?looks to be in play after Royal Dutch Shell late yesterday said it’s offloading about a third of its holding in Woodside for A$3.31 billion, to undisclosed equity investors.

Shell will retain its remaining stake for at least a year unless there’s a takeover offer or substantial stake purchase, but it’s unclear what its ultimate intentions are.

The move comes nine years after Shell’s full takeover bid for Woodside was blocked by the government, and may increase Woodside’s appeal as a takeover target given that Shell’s interest gave it a substantial blocking stake.

Woodside has long been touted by analysts as a potential takeover target for BHP Billiton—which just had its $38.6 billion bid for Potash Corp. of Saskatchewan blocked by Canadian regulators—but BHP hasn’t said publicly it’s interested in Woodside.

“Given that Shell seems to believe its best exit option was to sell just 10% of its 34% stake in the open market, we believe this does not bode well for any Woodside takeover activity in the medium term,” one broker says.

Merrill Lynch agrees that a near-term deal is unlikely but says the fundamental value of Woodside is unchanged, with Shell’s rationale to simplify operations clear: “We do not interpret Shell’s sale as a judgement on Woodside’s value.”

Deutsche Bank and Merrill Lynch kept buy recommendations on Woodside, while J.P. Morgan keeps its neutral call.

Australia’s S&P/ASX 200 ended down 0.8% Tuesday at 4740.7—its biggest single-day fall in the past two weeks—after hitting a three-day low of 4731.0, primarily due to the liquidity Shell’s sale of its Woodside stake generated.

–David Rogers contribued to this post.

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