Shell steps up Fletcher offer

By PAULA OLIVER energy writer

Royal Dutch Shell and Apache Corporation have upped the ante in their battle for Fletcher Energy, raising their offer in the face of court action from rival bidder Peak Petroleum.

The improved Shell offer - $US3.55 ($8.23) a share instead of $US3.34 ($7.74) - is scheduled to go to a shareholder vote on Tuesday.

If it is voted down, the separation of Fletcher Challenge will come to a halt.

Peak Petroleum, which made a late $US3.70 ($8.58) bid for Energy on Tuesday, is fighting the Shell deal. It is taking its case to the High Court at Auckland this morning in an attempt to get the Fletcher Challenge shareholders' meeting postponed after Fletcher bosses have refused to move it.

Fletcher Challenge chairman Roderick Deane said last night that Fletcher still had only one bid on the table - Shell's.

It was far from certain that Peak's proposal could be converted into a formal offer, he said.

The Fletcher board will argue in court today that the shareholders' meeting could not be postponed to March 23, because that would not allow Shell's offer to be approved before it expired. Shell has indicated it would walk away on March 23.

The alternative Peak proposal could not be voted on until at least June, Fletcher directors said.

The new offer from Shell came just as many market observers began to doubt the outcome of Tuesday's shareholder vote.

Peak Petroleum claims to have the backing of some Fletcher Energy shareholders and local and overseas institutions, but has not said whether it has enough of the register - 25 per cent - to stop the vote.

Its proposal is subject to finance and due diligence.

Greymouth Petroleum head Mark Dunphy yesterday revealed more of his backers. The National Australia Bank and the BNZ were major backers of the Peak proposal, he said, to the tune of $US650 million ($1.5 billion). FR Partners and GPG were providing $US125 million ($290 million) together, and a Houston-based private oil and gas investor was giving $US50 million ($116 million). Canada-based Penn West, which would take over Energy's Canadian and Argentinian assets for $US725 million ($1.68 billion), was also providing $US15 million ($35 million) for the local consortium.

An overseas fund manager spoken to by the Business Herald yesterday said he thought the shareholder vote would be close, before Shell had lifted its offer.

He said he had three or four shareholders in Energy, comprising 10 per cent of the company, who would vote against the Shell proposal. If there was not a full turnout at the vote, that would become a bigger slice of the 25 per cent needed to stop the deal, he said.

Another fund manager, AMP Henderson head Stephen Walker, said he held between 2 and 3 per cent of Energy. If it was not sold, people would be letting go of a firm deal, he said. It was not unreasonable for Fletcher to ask for committed backing before delaying the meeting.

Broking houses agreed that as much as half of Energy was held by arbitrage players keen to sell.

Mr Dunphy greeted Shell's raised offer with laughter. "What surprises me is that they have so little lead in their pencil."