Royal Dutch increases offer $1 billion for rest of Shell Canada, but some shareholders balking.
Shell Canada Ltd. said Tuesday the board supports the offer of $45 a share for the remaining 22 per cent of shares not already owned by Royal Dutch.
The Hague-based energy giant originally offered $40 a share, or about $7.7 billion, in October to secure a bigger stake in Alberta's growing oilsands business.
At least one major investor said Royal Dutch's offer is still not high enough to convince it to tender its shares.
"We're going to wait and look at what the independent committee valuation is, but at this point it's a no-go at $45," said Len Racioppo, chief investment officer at Jarislowsky Fraser in Toronto.
Shares of Shell Canada rose 34 cents to $45.25 on the Toronto Stock exchange on Tuesday. The stock has jumped nearly 38 per cent since Royal Dutch launched its initial bid in October.
But Racioppo, who values the shares "in the $50s," said the new offer still doesn't account for all of Shell Canada's oilsands holdings and longer-term projects. The company is also a major natural gas producer and refiner in Canada and operates a national chain of service stations.
"Our view on the valuation is there are some pretty significant assets here that are long-life and to some extent are like options; you can have some quite significant variability in the valuation," he said.
Garey Aitken, director of equity research at Calgary-based Bissett Investment Management, which also holds Shell Canada shares, called the revised offer "disappointing."
"We don't think $45 is sufficient, we remain of the view that $50 is what we would like to see," he said, adding that he was waiting for the formal offer that would include information on the independent valuation.
Royal Dutch Shell's offer is conditional on a majority of Shell Canada's minority shareholders accepting the bid, which several analysts expect to likely proceed.
Andrew Potter, an analyst with UBS Securities, said the offer represents a 13-per-cent premium on Shell Canada's net asset value.
"Overall we believe there is a good chance the deal closes at $45 per share. However, we would not rule out an increase to the bid," he wrote in a research note.
Royal Dutch Shell is seeking new sources of oil and gas after an accounting scandal in 2004 forced the company to repeatedly write down its reserves. The move will simplify its North American operations and increase resources to develop its oilsands holdings, company officials said when the deal was first announced.
Shell Canada owns a majority stake in the Athabasca Oil Sands Project -- Canada's third major mining project near Fort McMurray -- which produces 155,000 barrels of oil per day with plans to expand another 100,000 bbl/d.
Rising costs for labour and equipment have pushed the final price tag for oilsands project as high as $12.8 billion -- up from $7.3 billion a year ago and an original estimate of $4 billion.
Royal Dutch has also staked out its own oilsands territory last year, picking up nearly half-a-billion dollars in leases in northern Alberta last year under a new subsidiary called SURE Northern.
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