Investors stunned as Shell pulls out of fight to win Cove

Investors had anticipated a higher offer from one or both bidders, prompting hedge funds to buy in to Cove stock, and an auction process had been due to start this week.

PTT is offering 240p per share or about $1.9bn for Cove, which has made huge east African gas finds.

Shell had bid 220p.

Cove shares closed at 275.5p on Friday but after Shell’s shock announcement yesterday they dropped 13 per cent on the day to stand just shy of PTT’s offer at 238.5p.

“Shell Bidco has decided not to revise its offer of 220p in cash for each share of Cove, and not take part in the auction procedure for Cove,” Shell said.

It gave no reason for the decision, but analysts have been saying Shell has other ways to secure access to east African gas.

Cove owns an 8.5 per cent stake in a Mozambique licence containing some of the big gas discoveries, while US explorer Anadarko has a 36.5 per cent stake in the licence.

Analysts have said Shell could turn its attention to a deal with Anadarko.

Other points of entry to East Africa for Shell could include tie-ups with Italy’s ENI, which has also found gas in Mozambique, or BG Group and Exxon Mobil, which have discoveries off the coast of Tanzania.

The rival bidders had been heading into the first formal takeover auction for a listed UK company since 2008.