Shell ups ante on takeover

By GEOFF SENESCALL

Royal Dutch Shell, on the eve of a crucial ruling from New Zealand's competition watchdog, has offered to sell more gas assets in Fletcher Energy.

The offer sent Fletcher Energy's share price soaring 28c to $8.45 yesterday as the market interpreted this late adjustment as a positive signal for Shell's $4.6 billion takeover bid.

Last month, the Commerce Commission knocked back Shell's offer on the grounds that it would give the Dutch-based company dominance in the NZ gas market.

Shell resubmitted its offer, which values Fletcher Energy's shares at $11.22 each.

After the first knockback, the market had been sceptical of a favourable outcome. But, Matthew Rose, of brokers Merrill Lynch, said the latest development was positive.

"You have got to assume Shell has had some guidance from the commission to have resubmitted a revised bid at this stage," he said.

However, Mr Rose cautioned that the deal was still in the balance.

Shell's late alteration has not changed the commission timetable of making a ruling by tomorrow.

Shell is now offering to sell Fletcher Energy's interest in the Kaimiro and Mangahewa fields. This is on top of the asset sales Shell promised in its second application.

Shell chairman Ed Johnson said he did not want to prejudge the commission's decision.

"I wouldn't read anything into it other than wanting to make sure that we have got it procedurally correct.

"It is important to make sure, from our perspective, that we have not left any matters unaddressed.

"We have combed through all of the issues which have been raised and have done a bit of testing ourselves in devil's advocate form internally to make sure that we had addressed everything adequately."

While the Shell deal is important to Fletcher Challenge's restructuring, Fletcher still plans to shed its three remaining divisions whatever the commission decision.

Fletcher Challenge chairman Roderick Deane has told shareholders that Fletcher Energy will be set up as a stand-alone company if the Shell deal falls through.

He expects to complete the separation of the group's divisions by the end of March.

Fletcher Forests' row with Chinese-owned Citic over the management of their Central North Island Forest Partnership continues to fester.

By opting for a rights issue to recapitalise Forests, Fletcher has removed Citic's effective veto on the future of the forestry company.

Citic told the Bloomberg news agency that it was prepared to let the banks seize the partnership.

"We won't invest a cent into the partnership unless all the problems are solved and Citic replaces Fletcher as manager," said Cui Peisheng, a Citic managing director.

The partnership is a big source of logs for Fletcher Forests, but is likely to breach banking covenants soon unless it gets an injection of up to $US100 million ($251 million) from each of its partners.