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Royal Dutch Shell Raises Bid for Shell Canada to C$45/Share

Royal Dutch Shell plc said Tuesday it has reached agreement with Shell Canada's board and is raising its bid on all of Shell Canada's outstanding shares to C$45/share from C$40, which represents a value of about $8.7 billion.

Royal Dutch Shell, which already owns a 78% stake in Shell Canada, intends to proceed with a takeover bid for the company early next month. A circular containing the formal valuation of the Shell Canada common shares will be mailed to shareholders in February. The offer will be open for 35 days. The deal will be conditioned on more than 50% percent of the outstanding shares being tendered as well as other conditions, including regulatory approval and the absence of adverse litigation.

UBS analyst Andrew Potter said the bid represents a "significant premium" to any other large cap Canadian exploration and production company. "On a net asset value (NAV) basis, the revised offer represents a 13% to our NAV [per share long-term pricing estimates]," said Potter. "Overall, we believe there is a good chance the deal closes at $45/share. However, we would not rule out an increase to the bid.

"The premium value being offered for SHC highlights the value of many other oil sands players," he said. Potter added that he believes other producers, such as Canadian Natural Resources, EnCana, Nexen and Suncor Energy also are trading at discounts given the Shell Canada offer price.

SHC.TO shares were up slightly in trading Tuesday to $45.20 on the Toronto Stock Exchange. Shell Canada had about 234,000 boe/d of production in the third quarter of last year. The company owns four gas processing plants, an in situ oilsands project and a 60% stake in the Athabasca Oil Sands Project joint venture. It also has a 31.3% share of the Sable Offshore Energy Project offshore Nova Scotia.

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