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On The Case
Shell in $2.2bn bid for Barrett
Date of publication - 07 March 2001
Royal Dutch/Shell, the Anglo-Dutch oil giant, on 07 March, 2001 launched its third bid in 10 months with a $2.2bn offer for Barrett Resources Corporation, a US independent natural gas exploration and production company.
Shell offered $55 a share in cash for outstanding Barrett stock, representing a 24 per cent premium to the closing price on February 28, the day before Shell first made its approach to Barrett directors.
The bid values Barrett at $1.8bn. Shell also proposes to assume around $400m of debt. Barrett's shares surged more than 32 per cent in early trading in New York to $60.51.
Barrett is considering the proposal and will respond by Friday, March 9. In a departure from its usual style of acquisitions, Shell said it would be ready to launch a hostile bid if Barrett's board did not respond favourably.
Analysts expressed surprise at the move, saying it could mark the start of "open warfare" on the exploration and production sector in the US.
One said: "I can't remember the last time Shell launched a hostile bid. This shows that they have a lot more stomach for a fight than they had in the past."
Barrett is based in Denver and operates in the Rocky Mountain region of the US, the mid-continent area and the Gulf of Mexico. It employs around 200 people and made net income last year of $68m on revenues of $376m.
Walter van de Vijver, president of Shell's exploration and production arm, said the deal would give it an immediate material presence in the Rocky Mountain region, which is the second largest natural gas basin in the US.
"This transaction will strengthen and diversify our asset portfolio and will enhance Shell's natural gas position with tangible growth opportunities outside our existing core areas", he said.
Shell currently has an almost equal split between its oil and natural gas reserves but is strengthening its gas operations close to key growth markets. Wholesale gas prices have more than doubled in the US in the last year and are expected to remain strong due to growing demand and constraints on exploration sites.
The announcement follows the acceptance on Tuesday of Shell's joint $2.1bn bid with US independent Apache for Fletcher Challenge Energy, the New Zealand oil and gas company. Shell is also attempting to gain control of Woodside Petroleum, Australia's largest oil company, in a complex cash and assets deal which is being scrutinised by the Australian Foreign Investment Review
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