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Tuesday, 2 April, 2002, 13:50 GMT 14:50 UK
Shell bids 4.3bn for rival oil giant
Oil rig in Nelson field, North Sea
Enterprise Oil's heritage is rooted in North Sea drilling
Petroleum giant Shell is poised to snap up UK competitor Enterprise Oil for 4.3bn.

Shell's bid has won the backing of the board at Enterprise, the UK's biggest independent oil explorer.

Sir Graham Hearne
Sir Graham Hearne: Career "opportunities"
The deal would see Shell buy Enterprise's oil reserves, of 1.5 billion barrels, for about $4 per barrel.

The offer intensifies Shell's acquisition spree, which last week saw the oil major agree to pay $1.8bn (1.3bn) for Pennzoil-Quaker State, the biggest US motor oil company.

Shell had previously remained isolated during the oil industry's period of intense consolidation in 1998 and 1999 which saw firms such as BP, Total, Elf, Exxon and Mobil in full-scale mergers.

Job fears

Shell estimates the merger with Enterprise would shed $300m in costs through cutting duplicated activities.

The price is on the high end of the scale

David Thomas, Commerzbank

The level of cost cuts, mostly set to come from "operational efficiencies", will raise fears of job losses, although Shell chairman Phil Watts said he only expected 100-150 Enterprise jobs to go.

Enterprise chairman Sir Graham Hearne said the takeover held benefits for remaining staff.

"For Enterprise employees, there is the opportunity to develop their careers as part of the Shell Group," Sir Roger said.

Shares soar

The deal also offered "substantial" benefits to Enterprise shareholders, Sir Roger said.

The bid comprises 725p cash per Enterprise share, plus acceptance of 800m in debt.

Enterprise shares closed on Friday at 629p, and at 500p before the firm revealed, in January, that it was involved in merger talks.

But the shares edged above Shell's bid level, to 726p, as speculation grew of a rival bid.

City reaction

Vittorio Mincato, head of Italian oil firm Eni last, week speculated that the group might pay up to $5.5bn for Enterprise.

But observers pointed to a statement in January by British energy minister Brian Wilson, who warned that a foreign takeover of Enterprise Oil could lead to the under-exploitation of North Sea oil reserves.

Analysts also doubted whether Eni would have the stomach to fight a takeover battle against Shell, already thought to be offering a full bid for Enterprise.

"The price is on the high end of the scale," said David Thomas, an analyst at Commerzbank.

"But [Shell] say they're going to get some synergies - that will more than make up for the premium that we think they're paying."

Shell stock was 4p higher at 527p.

'Major discovery'

Enterprise Oil was formed in 1982 by the UK government as the oil exploration and production arm of then state-owned British Gas.

Enterprise was floated in 1984.

The firm taps oil from 41 oil fields, largely in the North Sea, and reported pre-tax profits of 667.8m last year.

The company also on Tuesday reported a "major discovery" from drilling activities in the Gulf of Mexico.

The BBC's Rachel Walton
"Shell has come out on a shopping spree."
See also:

02 Apr 02 | Business
Shell trails BP's lead
07 Feb 02 | Business
Shell profits ease at year-end
31 Dec 01 | Business
Tide turns against the oil firms
17 Dec 01 | Business
Shell to trim costs by $1bn
02 Aug 01 | Business
Shell profits continue to gush
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