Finance Example

Finance Example Finance – Essay Example CASE STUDY: SHELL’S ATTEMPT TO TAKEOVER WOODSIDE The dream takeover on Woodside Petroleum by Shellin 2001 was not to be. The Australian government, under the Foreign Acquisition and Takeovers Act rejected the bid. The person primarily responsible for this was Mr. Peter Costello, the federal treasurer at that time. In his speech for giving reasons why the Shell takeover bid was rejected, Mr. Costello said he believed that the takeover was not in the national interest of the Australians. . PART (A) Reasons why Mr. Costello rejected Shell to take over Woodside, 1. There was strive fear among Australians that their job security would be threatened if Shell was to take over. In case Shell took over, the Shell owners might have tried to improve the efficiency of Woodside operations in line with the parent company’s criteria. This would have included bringing in machinery and employees whom they believed would deliver what was required. The complication to this is that the machinery brought in might replace the human input to perform tasks that would lead to massive layoff of workers. Bringing in their own specialists would have also caused unemployment to specialists from Australia. This would be devastating to the government considering the fact that in 2001 the unemployment rate in Australia was at about 6% high. 2. The Woodside petroleum company is Australia’s major explorer and production of petroleum and gas. This means that most, if not all, areas that have these fuel extracts are exploited by Woodside and her joint partners. If Shell were successful in its bid, this would be catastrophic to Australia in that its resources would be under exploited. Mr. Costello believed that, Shell would be incapable of fully exploiting fuel in Australia as it would be too busy giving priority to its operation in Russia’s Sakhalin Island, which had promising results for Shell hence under developing the operations that Woodside was involved in especially the North West Shelf gas field, which was Australia’s largest developed energy resource at that time. 3. â€Å"National interest that it be developed and marketed in preference to competing products from anywhere in the world† (Mr. Peter Costello- Reserve treasurer, 2001). Here Mr. Costello was talking about the North West Shelf gas field. Analysts believed that if this part was effectively exploited, the liquid gas from here had potential of becoming the country’s largest export. Most of Australia’s gas and petroleum resources are based in the western region, hence, it was very important for the North West Shelf to be maximized; this would provide the country with income and a favourable balance of payment. This meant all measures had to be taken to ensure the potential of the country’s resources were fully utilized. The North West Shelf has estimated natural gas resources of more than 3168 Gm3 (130 Tcf) PART B: Reasons why Shell wanted to acquire Woodside. 1. In the year 2001, Shell already had 34% share claim to Woodside petroleum. Through the takeover bid, Shell expected to increase its share in Woodside to 56% hence being the majority shareholder. This would work in the favour of Shell in that it would be given the chance to appoint more directors at the Woodside Company. A higher number of directors in the board would assure the decision makers at Shell that most of their decisions would be passed with a high number of votes by the directors they appoint to the board. 2. The idea of a takeover bid by Shell would be a kind of expansion plan. Though Shell has continually denied it, taking over Woodside would be like opening an office branch for Shell in Australia. This would ensure that Shell has a deeper grip on the Asia-pacific region in the petroleum and gas industry. 3. Shell’s hostile takeover of Woodside would have guaranteed Shell more gas fields, particularly in North West shelf of Australia. This would have increased the production and output that essentially will be transferred to increased revenue and profits for the firm, hence, putting Shell ahead of companies it competes against in the petroleum and gas exploration and production industry like, British petroleum and Exxon. APPENDICES APPENDIX 1 REFERENCES New York Times â€Å"Australia Rejects a Shell Takeover bid† nytimes.com/2001/04/24/business/australia-rejects-a-shell-takeover-bid.html?src=pm Foreign investment review board â€Å"Foreign Investment Proposal  - Shell Australia Investments Limited’s Acquisition of Woodside Petroleum Limited† treasurer.gov.au/tsr/content/pressreleases/2001/025.asp Monash University, Kalfadellis, Judy Gray & Susan Freeman "The National Interest and the Screening of Foreign Direct Investment in Australia" Monash: Monash University,