* PTT can now complete 240 pence a share deal
* Shell did not want to overpay-source
* Move makes Shell/Anadarko tie-up look likely
By Sarah Young and Sophie Sassard
LONDON, July 16 Royal Dutch/Shell
abandoned its bid for Cove Energy Plc on Monday,
leaving smaller Thai rival PTT Exploration & Production
to complete a $1.9 billion takeover and fuelling talk
it has found a new way to access east Africa's gas discovery
The move will have cost hedge funds dear. An auction process
had been due to start this week, and Cove stock had been bid
well above PTT's offer price of 240 pence a share in
anticipation that Shell would raise its 220 pence offer.
Cove shares, which closed at 275.5 pence last week, dropped
13.6 percent to finish just shy of PTT's offer at 238.5 pence
after the news.
"Shell Bidco has today decided not to revise its offer of
220 pence in cash for each share of Cove, and not take part in
the auction procedure for Cove," Shell said in a statement.
Analysts say Europe's largest oil and gas group has other
opportunities to secure the access to the gas finds off
Mozambique and Tanzania that were the reason for the takeover
Shell gave no reason for withdrawing, but a source familiar
with the bid process said it did not want to overpay and was
confident it could get into east Africa gas action by other
Cove owns an 8.5 percent stake in a Mozambique licence in
the Rovuma offshore basin containing gas discoveries that could
be a major provider of Liquefied Natural Gas (LNG) to Asia in
Shell has much at stake in LNG market, hence its strong
desire to get involved in potential new supplies. U.S. explorer
Anadarko has a 36.5 percent stake in the licence, but
little experience of LNG. A tie-up of some sort has long been
mooted by analysts.
"I would be very surprised if they hadn't talked to
everybody here," said the source, who spoke on condition of
anonymity. "LNG is the hot stuff right now and Shell's
investment committees are very aware of it. Something could well
happen by the end of the year."
Other points of entry to East Africa for Shell could include
tie-ups with Italy's ENI, which has also found gas in
Mozambique, or BG Group and Exxon Mobil, which
have discoveries off the coast of Tanzania.
The rival bidders had been heading into the first formal
takeover auction for a listed British company since 2008 after a
five-month bidding war.
Britain's takeover watchdog ruled on Friday that if neither
suitor had declared its current offer final before 1600 GMT on
Monday, an auction would start the next day. That could have
involved bids submitted to daily deadlines until a winner was
The two companies have been battling to buy Cove since
It was not just the hedge funds who did not see Shell's
"I was very surprised to see Shell walk," said an investment
banker who was not involved in the deal. ... I think that Shell
didn't want to take the risk of increasing their offer and
getting trumped by PTT again. They didn't want to end up as the
losers. They must have a plan B around Anadarko or one of the