Thailand's biggest gas and oil company PTT Exploration and Production has won the battle for control of U.K.-listed Cove Energy after rival bidder Royal Dutch Shell dropped out on Monday, sending Cove's shares down more than 13 per cent.
The U.K. Takeover Panel had earlier set out the rules for an auction procedure to bring an end to the bidding war for Cove, which began in February. But Shell announced on Monday that it would not raise its bid of £2.20 a share, which values Cove at £1.12-billion ($1.77-billion), leaving PTT's offer of £2.40 a share, or £1.22-billion ($1.93-billion), in the lead.
Shares in Cove had been trading above both offers for several months, reflecting investors' hopes of higher bids, and Shell's decision to walk away caused the stock to drop 13.4 per cent.
PTTEP, which is 67 per cent owned by Thai state-owned parent company PTT, has so far won acceptances from only 0.25 per cent of Cove shareholders. The offer expires on July 25.
Cove's key asset is a 8.5 per cent stake in Mozambique's Rovuma Area 1, thought to be one of the world's richest natural gas discoveries with more than six times the U.K.'s existing gas reserves. Anadarko of the U.S. operates the field and owns a 36 per cent stake, while Indian and Japanese partners as well as the Mozambique government own 15 per cent each.
For PTT, buying Cove is central to its push to diversify Thailand's sources of natural gas and to increase imports of liquefied natural gas. PTT's chief executive, Pailin Chuchottaworn, told the Financial Times last month that the Cove bid was "part of a strategy," and was "a very careful, calculated move." He also emphasized that it came at a time when PTT – which is about two-thirds government owned – was seeking to redefine its role as a national oil company and be more proactive in mergers and acquisitions.
Shell is also keen to gain exposure to east Africa's booming gas industry. It already owns exploration projects in Tanzania, and following the failure of its Cove bid could look at deals with the other partners in Rovuma, such as Anadarko, as a way to invest in the field.