Gulf increases offer for Clyde to 120p a share

The finely balanced bid battle between Gulf Canada and Clyde Petroleum entered the finishing straight yesterday after Gulf launched a final offer of 120p a share for its smaller British target and moved into the market to buy shares. The new bid, which replaces Gulf's 105p offer, puts a value of just under pounds 500m on Clyde.

Gulf said it was confident it had pitched its new bid at just the right level to secure control and said it was surprised at how many Clyde shareholders had accepted its cash offer in early dealings yesterday morning, given rumours in the market that a third-party bid might emerge at the eleventh hour. By the close of play yesterday afternoon it had mopped up 15 million shares, or just under 3 per cent of Clyde's equity.

JP Bryan, chief executive, said he thought a rival bid from a "white knight" was unlikely. Gulf cannot now increase its offer unless another bid is announced before 18 February, the end of the official 60-day offer timetable.

Malcolm Gourlay, chairman of Clyde, responded: "Clyde's value is not speculative - it is real, it is substantial and it belongs to our shareholders. Gulf Canada is a highly leveraged vehicle that can't afford to pay full value for Clyde. Clyde is worth a great deal more than this offer."

Institutional shareholders, who had previously expressed unwillingness to accept an offer pitched at less than about 135p, were yesterday considering their options, although the main players who will decide Clyde's fate are unlikely to make a final decision for 10 days or so. More than half Clyde's shares are held by Schroders, PDFM, Capital Group of the US and Norwich Union. About two-thirds of the equity is in the hands of seven fund managers.

Analysts thought Gulf might have done just enough to clinch victory yesterday after a strong offer document attempted to dismantle the main planks of Clyde's recent defence. In the market, Clyde's shares moved 2.5p higher to 120p as dealers weighed up the possibility of a white knight with a potential fall in the shares if the bid failed to persuade shareholders.

Gulf said its new offer represented 100 per cent of a net asset value figure signed off by ERC, an oil industry consultant commissioned by Clyde to assess its value. By contrast, Gulf said, contested offers for oil exploration and production companies over the past 12 years had gained shareholder support at an average 75 per cent of such commissioned valuations.

Gulf criticised ERC's base asset value of 120p, saying it relied on unrealistic discount and inflation rates and over-optimistic exchange rate assumptions and oil price forecasts.

Comment, page 19

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