Enterprise Investors Holding Out for More

Shell is having a tough time convincing investors to accept its 725 pence per share offer for Enterprise Oil and many are still holding out for a higher offer. Shell has been in the market for Enterprise shares since announcing a 3.5 billion pound ($5 billion) bid for the group on Tuesday but had only managed to buy 11.7 percent of the share capital by Friday, evidence that many were reluctant to sell up just yet.

Shell's 11.7 percent, which includes 0.5 percent held by the group's pension fund, falls far short of the 30 percent that bidders are allowed to buy in the market under takeover rules. Although hopes for a counteroffer faded on Thursday when Italian energy giant Eni SpA said it would not bid, Enterprise's share price still suggests some are hoping for a rival suitor to emerge.

"The funds are just sitting on their hands, they can afford to wait," a source close to the deal said. TotalFinaElf or Statoil are still seen as potential candidates, and industry players did not rule out interest from North American players such as Chevron Corp. or Conoco.

By 1045 GMT on Friday, Enterprise shares were trading at 723-1/2 pence, just a tiny discount to the offer price, and higher than they should be if the market was convinced Shell's 725p would win out. The shares had risen 10 pence above the offer price on Tuesday.

"(Institutional investors) haven't given up," said one source familiar with the situation. "The time value of money would have it (the share price) lower than that, there would be a discount."

Target shares tend to trade at around a five percent discount to any offer before a deal is concluded because of the time value of money and as regulatory and completion risk means the offer price is not guaranteed.

Shell, which is expected to have to wait around four weeks for regulatory approval of its purchase, will post its offer document early next week, sources said. Approval for the Shell offer, however, is expected to be forthcoming if no rival emerges.