SHELL yesterday announced that it had agreed to sweeten its bid for Cove Energy with a $1.8bn (£1.1bn) cash offer.
Cove’s directors have recommended that shareholders accept the bid rather than an equivalent offer from Thai state-controlled oil firm PTTEP.
Chief executive John Craven and two other directors are in line for a combined windfall of more than £35m under Shell’s proposal.
The move by Shell is aimed at expanding the company’s footprint in east Africa, as Cove’s assets are primarily in Mozambique. The company previously made a $1.6bn approach for Cove in February, before PTTEP beat the offer. Both companies are circling for Cove because east Africa is tipped to be a major source of liquid natural gas. It is understood that fears that the deal could be scuppered by huge capital gains payments to Mozambique have eased.
The deal still needs to clear a shareholder vote with the prospect that PTTEP could pitch in with its own improved bid.
“Competing offers can still be made and the shares will now likely trade to a slight premium on the hope that PTTEP will trump Shell,” said Investec analysts said in a note.
However, the deal includes a break fee clause, meaning Cove will have to pay Shell £11.1m if it later accepts a rival bid.
Westhouse Securities analyst Andrew Matharu said Mozambique would likely favour Shell’s offer because of its expertise and financial clout. Cove’s main asset is an 8.5 per cent stake in the Rovuma Offshore Area 1 in Mozambique.