Woodside’s buyback deal with Shell at risk of being blocked

7/31/2014

Woodside’s buyback deal with Shell at risk of being blocked

JAMES PATON

PERTH, Australia (Bloomberg) -- Woodside Petroleum Ltd’s plan to buy back shares from Royal Dutch Shell Plc for $2.7 billion is at risk of being rejected by shareholders as it falls short of the votes needed to proceed.

About 71% of the proxy and direct votes cast back the proposal, compared with the 75% required, the Perth-based company said on July 31 in a statement. About 59% of those entitled to vote have done so, with a final outcome to be determined at a shareholder meeting on August 1.

The resolution “needs an avalanche of yes votes tomorrow to get approved,” Nik Burns, a Melbourne-based analyst at UBS AG, said on July 31 in a note. Without that, “it looks like the resolution is headed for defeat.”

The buyback is part of Shell’s deal last month to raise $5 billion trimming most of its 23% stake in Australia’s second-largest oil producer. A no vote would leave Shell with a larger, unwanted stake, and add to Woodside’s frustrations after a plan to invest as much as $2.6 billion in an Israeli gas project collapsed, according to Macquarie Group Ltd.

Woodside shares fell 0.8% to close at A$42.52 in Sydney trading. The S&P/ASX 200 Index gained 0.2%.

Woodside may offer similar terms to all shareholders if the deal is blocked to allay concerns that investors aren’t being treated equally, according to a July 21 Macquarie report. The buyback is a great deal for Shell with the generous allocation of franking credits, which reduce an investor’s tax bill, and Woodside trading at three-year highs, Macquarie said.

After an “equal-access” buyback, Shell would still be a substantial holder in Woodside with about 11% of the shares, according to UBS.

Woodside said June 17 it had agreed to buy back the shares for A$36.49 each, a 15% discount to the previous day’s closing price. The Hague-based Shell separately sold 78.3 million shares to investors at A$41.35 each, about a 3.5% discount to the June 16 close.

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