Shell to sell stake in Australia’s Woodside for $5 billion

Royal Dutch Shell, Europe’s largest oil company, is selling most of its stake in Australia’s Woodside Petroleum Ltd. for about $5 billion after tax as the company accelerates asset sales.

Shell is selling 78.3 million of its Woodside shares to investors and the Australian company plans to buy back the same amount of stock from Shell, The Hague-based company said early Tuesday in a statement. That’s a total of about 19 percent of Woodside.

Shell flagged last year that it would eventually sell its 23 percent holding in Australia’s second-largest oil and gas producer because it was no longer strategic. Woodside, which operates the Pluto liquefied natural gas project in Western Australia, closed Monday at a three-year high.

“Woodside is master of its own destiny without that encumbrance,” Tim Schroeders, portfolio manager at Pengana Capital Ltd. in Melbourne who helps oversee about A$1.2 billion ($1.1 billion), said by phone. “This breaks up an overhang people have been aware of for a long time and allows both companies to move forward with their own strategies.”

Woodside, which closed Monday at A$42.85, was halted in Sydney trading. The company has a stock market value of about A$35.3 billion.

Woodside Chief Executive Officer Peter Coleman pressed Shell in February to take action on its stake, saying investors wanted “certainty.”

The transactions follow Shell’s sale of a 10 percent stake in Woodside in November 2010 at A$42.23 a share. It’s new stake will drop to a maximum of 4.5 percent.

In 2001, the Australian government blocked Shell’s takeover bid for Woodside. At the time, Woodside ran Australia’s only LNG plant and the government was concerned Shell would slow Woodside’s expansion by prioritizing other investments in Asia.

Shell has hired two investment banks to sell 78.3 million Woodside shares, or about 9.5 percent of the Australian company’s issued capital, at A$41.35 each, about a 3.5 percent discount to Monday’s close, while Woodside agreed to buy back the same number of shares for A$36.49 each, a 15 percent discount.

“The combined transaction will also increase our liquidity in the market and resolve the uncertainty in relation to Shell’s shareholding that has existed for several years,” Coleman said in a statement.