Woodside Petroleum’s plan to buy back shares from Shell for $2.7billion is at risk of being rejected by shareholders as it falls short of the votes needed to proceed.
About 71% of the proxy and direct votes cast back the proposal, compared with the 75% required, the company said. About 59% of those entitled to vote have done so, with a final outcome to be determined at a shareholder meeting tomorrow.
The resolution “needs an avalanche of yes votes tomorrow to get approved,” said Nik Burns, a Melbourne-based analyst at UBS. Without that, “it looks like the resolution is headed for defeat.”
The buyback is part of Shell’s deal last month to raise $5billion trimming most of its 23% stake in Australia’s second-largest oil producer.
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 $2.6billion in an Israeli gas project collapsed, according to Macquarie Group.
Woodside may offer similar terms to all shareholders if the deal is blocked to allay concerns that investors are not being treated equally, according to a July 21 Macquarie report. The buyback is a great deal for Shell with the generous allocation of franking credits, which reduce an investor’s tax bill, and Woodside trading at three-year highs, Macquarie said .
After an “equal-access” buyback, Shell would still be a substantial holder in Woodside with about 11% of the shares, according to UBS.
Woodside said June 17 it had agreed to buy back the shares for $34 each, a 15% discount to the previous day’s closing price. The Hague-based Shell separately sold 78.3million shares to investors at $38.53 each, about a 3.5% discount to the June 16 close.
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