M&A

Bowleven takeover talks with Dragon Oil off - no offer forthcoming it seems.

Ithaca release today stating unsolicited interest from a number of third parties:
http://online.hemscottir.com/ir/iae/news_xml.jsp?item=931896234100029

ee,

I don't see 245p cutting the mustard either. Ultimately it'll need 275p+ IMO.

The elephant in the rovuma might be the Mozambique Gov't, which has to give consent for the transfer to the successful bidder.  From the Shell 195p proposed offer RNS:

The making of an announcement of a firm intention to make the Proposed Offer by Shell Bidco (the "Firm Intention Announcement") is subject to, and conditional upon, the receipt of written consent of the Republic of Mozambique's Minister of Mineral Resources (or through one or more delegated representatives) as required under Article 24.1 of the Exploration and Production Concession Contract relating to Cove's 8.5 per cent participating interest in the Mozambique Rovuma Offshore Area 1 Block (the "Rovuma Area 1 Interest"), such consent to be in a form satisfactory to Shell Bidco (the "Mozambique Consent").

http://www.investegate.co.uk/Article.aspx?id=201202220704198768X

Cove also stated that, were Shell to make a firm offer at 195p, it would expect to recommend it to shareholders.

I know nothing at all useful about this sort of situation, but Shell would appear to be the preferred acquiror from MozGov's point of view, so does Shell have to match or exceed the other two proposers of offers, if indeed they make them firm offers?

Is there an "ethical" precedent in a situation like this?

In reply to chriswalden, post #649

 Cove also stated that, were Shell to make a firm offer at 195p, it would expect to recommend it to shareholders.

That is the way that many have construed their comment, but the reality is a bit more nuanced, IMO:

The Board of Cove believes that the level and nature of the Proposed Offer are such that it is in its shareholders' interests to progress matters with Shell Bidco to the point where such an offer can be made. Accordingly, the Board of Cove would expect to recommend the Proposed Offer of 195 pence in cash per Cove share, if made. It has been agreed that, if the Board of Cove does so recommend the Proposed Offer of 195 pence in cash per Cove share, each director of Cove will provide a hard irrevocable undertaking to accept the offer in respect of his own entire beneficial holdings of Cove shares and those of his family members and related trusts.

With PTTEP on the table at 220p, I don't see any way at all that the Cove board can recommend Shell at 195p (unless PTTEP are vetoed by the Governrnent).

IMO the Mozambique Government are likely to be equally happy with PTTEP or Shell....which is why I think it will come down to price and how much the bidders want the assets.

ee

With PTTEP on the table at 220p, I don't see any way at all that the Cove board can recommend Shell at 195p (unless PTTEP are vetoed by the Governrnent).

The MozGov earns nothing from the transfer whatever price Cove is sold for, so its main consideration must be the quality of the new partner, both in terms of financial strength and project execution, particularly since that partner won't be stopping at 8.5%. In all probability, Shell could end up becoming the largest equity holder in the LNG development. I'm not so sure  PTTEP or the Indians could match that degree of financial commitment.

In reply to chriswalden, post #651

The MozGov earns nothing from the transfer whatever price Cove is sold for, so its main consideration must be the quality of the new partner, both in terms of financial strength and project execution, particularly since that partner won't be stopping at 8.5%. In all probability, Shell could end up becoming the largest equity holder in the LNG development. I'm not so sure  PTTEP or the Indians could match that degree of financial commitment.

Yes of course. But I am just saying that, in the context of the political nature of the decision and international relations, I think that PTTEP is likely to be at least as acceptable as Shell (especially since the stakes on this deal are only 8.5% - whether Shell have grander ambitions is completely by the by for now). I'm less sure though how some of the other possible bidders would be viewed.

My point about Cove being unable to recommend Shell at 195p is more a reflection of their fiduciary duty to their shareholders than anything else.

The MozGov earns nothing from the transfer whatever price Cove is sold for,

From newswires

BFW 03/01 16:11 Mozambique Plans to Tax Cove Energy Share Sale, Minister Says BN 03/01 16:04 *MOZAMBIQUE RESOURCES MINISTER ESPERANCA BIAS COMMENTS IN MAPUTO BN 03/01 16:04 *MOZAMBIQUE WILL ADVISE COVE ON TAX WHEN DEAL CONCLUDED: BIAS BN 03/01 16:04 *MOZABIQUE `STILL WORKING ON HOW MUCH TAX' WOULD BE PAID: BIAS BN 03/01 16:04 *MOZAMBIQUE PLANS TO TAX COVE ENERGY SHARE SALE, MINISTER SAYS

In reply to djpreston, post #653

Not a particularly accurate piece of reporting to say that they "plan to tax" Cove's share sale, as far as I can tell from Reuters:

"We are monitoring the negotiations and what we have said is that we are going to put in place a capital gains tax," Esperanca Bias told journalists.

So...no basis for such a tax exists at present - and I'd struggle to see how they are going to frame a tax on transactions take place abroad and which almost certainly does not affect the ownership of ANY Mozambique company or the profits of any of its citizens (except any shareholders in Cove who happen to reside there).

In the improbable event that they can frame a tax which retrospectively taxes transactions between foreign owners of assets in Mozambique, I'd expect Anadarko, ENI and others to be taking careful note.

Of course one can understand the temptation for the minister - but she would surely be best advised to let all the investment take place in Mozambique and take in tax what would doubtless be a decent slice of the income generated therefrom. Yes that would be a few years down the road, but it must surely be better to wait than to risk diverting investment - and some of the best economic opportunities the country has ever seen.

In reply to emptyend, post #654

RNS from Cove this morning, saying that they are "seeking clarity" on the tax reports.

That isn't surprising - and I'd expect the eventual legal position to be as laid out in my previous post. However, investors who are concerned about the timeline for obtaining such "clarity" would perhaps do well to remember that "Mozambique time" in the relevant ministries may not take account of the pressures of M&A timetables etc. From that perspective (rather than my strictly legal points), those who took the money and ran yesterday (such as djp, from reports elsewhere ;-)), may prove to have been prudent. We may find out rather sooner than the tax questions resolve.

Meanwhile, Shell (and PTTEP) are doubtless keeping their powder dry and their ears to the political ground. I'd guess that both have room to increase, if the Government doesn't try/manage to take a slice.

ee

ps.....of course this sort of potential for tax/interference may well be precisely why the Cove board wanted Shell to put a formal offer on the table. Very much better to flush such issues out at an early stage than to have to amend a deal later on (Cove currently down 15p at 210p at 8.10 am)

In reply to emptyend, post #655

Cove RNS this morning, clarifying the Mozambique tax plans. Probably a better "worst case" scenario than some had assumed - and the market seems back on track and looking for the bidders to raise their indicative offers.

ee

Sharescope has Soco at 284p this evening.

Is there any hint that share buybacks will resume?

In reply to MadDutch, post #657

No.

There have been no buybacks since 31st Jan - which was the last time the share price was at this level.

There are several possible explanations - but only one of them would be on topic for this thread, so if you want to consider other angles or just talk about buybacks, please use another thread.

In reply to emptyend, post #658

ee, This subdivision of Soco into a multitude of specific threads is confusing. Very easy to miss posts.

Frankly, the Motley Fool filing system for posts is a lot more user friendly. Very hard to miss posts.

In reply to MadDutch, post #659

If you read the header, MD, you will see this isn't a SOCO thread at all

I've set up this thread as a "home" for any live topics relating to M&A in the Oil sector.

- hence my comment redirecting you! You have just posted on a sector board!

Cove Energy plc

Summary

* Further to the announcement of a possible offer by Shell Bidco for Cove on
22 February 2012, the boards of directors of Cove and Shell Bidco are
pleased to announce that they have reached agreement on the terms of a
recommended cash offer to be made by Shell Bidco for the entire issued and
to be issued share capital of Cove. Shell Bidco is an indirect wholly-owned
subsidiary of Shell incorporated in the Netherlands.

* Cove Shareholders who accept the Offer will be entitled to receive 220
pence in cash for each Cove Share.

* The Offer values the entire issued and to be issued share capital of Cove
at approximately £1,120 million and represents a premium of:

* 134 per cent. to the Closing Price of 94 pence per Cove Share as of 12
December 2011, the last Business Day prior to the date of the announcement
by Cove of its proposed sale of the Rovuma Area 1 Interest;

* 95.6 per cent. to the Closing Price of 112.5 pence per Cove Share as of 4
January 2012, the last Business Day prior to start of the Offer Period; and

* 42.4 per cent. to the Closing Price of 154.5 pence per Cove Share as of 21
February 2012, the last Business Day prior to the date of the Possible
Offer Announcement.

http://www.investegate.co.uk/Article.aspx?id=20120424070121P565E

In reply to Isaac, post #661

Whilst there is a recommendation from the board, and a commitment of their shares....and there is an £11mn break fee....that may not be quite the end of the matter. The door is still ajar for PTTEP, even though Shell have matched their offer and got a recommendation:

Other potential offerors can still nonetheless announce competing offers for Cove.

PTT Exploration & Prod PublicCo Ltd

Outbids Shells 220p
Under the terms of the Acquisition, Cove Shareholders who accept the Offer will be entitled to receive:



o for each Cove Share held, 240 pence in cash.

http://www.investegate.co.uk/Article.aspx?id=201205230710089168D

In reply to Isaac, post #663

I notice that the shares are once again trading at a premium to the offer....247.5p currently.

It seems to me that Shell have been very cautious in their approach here - excessively cautious, in fact ..... given the obvious likelihood of a bidding war. They may have done better to try to deter a Thai bid in the first place, by showing rather more serious intent!?

Of course they may also be playing a canny game, and planning to cap the Thai bid with 270p+ - figuring the Thais won't pay near £3. But at some point the music will stop for sure. At 240p (+tax paid) the shares are already close to where I thought a deal would be done (equivalent to c 270p)....though of course there have been further material discoveries since then.

Interesting times for Cove holders.

And who would have ever guessed it?

Tom Cross' PArkmead Parkmead (LON:PMG). has gone and bought Deo Petroleum (LON:DEO) for 2 PMG shares for 1 DEO.

Good eal for TC but a lousy one for DEO (unless you view the paper as worth having to give you an upside exposure.

Sorry if that post looks odd. For some reason, even without clicking the text editor, it woudlnt work correctly.