Woodside Chairman Defends $2.7 Billion Buyback Deal With Shell

Jul 23, 2014 4:12 am ET

July 23 (Bloomberg) -- Woodside Petroleum Ltd., Australia’s second-largest oil and gas producer, defended a plan to buyback about $2.7 billion of stock from Royal Dutch Shell Plc amid concern investors may reject the deal.

“You get a different set of views from investors about what is a good thing and what is not a good thing,” Chairman Michael Chaney said today in Perth. “Our judgment is that this is in the best interest of all shareholders.”

Woodside’s buyback is part of last month’s $5 billion deal in which Shell, Europe’s largest oil company, will trim its 23 percent stake in the Australian company. It’s possible that Woodside investors voting on the transaction Aug. 1 will block the buyback, according to Macquarie Group Ltd.

Ownership Matters Pty, a shareholder advisory company in Melbourne, recommended voting against the buyback, Martin Lawrence, its governance analyst, said today by phone.

Woodside agreed to buy back shares for A$36.49 each, a 15 percent discount. As part of the deal, The Hague-based company sold 78.3 million shares to investors at A$41.35 each, about a 3.5 percent discount to the June 16 close.

Woodside rose 1.2 percent to A$42.37 in Sydney.

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, Macquarie analysts said in a July 21 report.

The buyback is a “great deal” for Shell with Woodside trading at three-year highs and the generous allocation of franking credits, which reduce an investor’s tax bill by recognizing that the company has already paid a levy on its profits, according to the Macquarie report.

“In the case of buying back Shell’s shares, it’s part of a two-part transaction,” Chaney said. “For shareholders that don’t participate in that, they get an uplift of dividends.”