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Woodside loses Shell vote for $2.5bn buyback

Shareholders rejected the buyback which needed to reach a 75% threshold to pass

A large chunk of Woodside Petroleum’s shareholders have rejected one of Australia’s longest planned corporate divorces by voting down a A$2.7 billion ($2.51bn) deal to buy back a tranche of its own shares from Shell

A shareholder vote failed to hit the 75% acceptance threshold needed to carry the board’s proposal for a selective buyback – structured in a tax efficient manner for Shell – for a 9.5% stake in the Perth-based operator. 

The nature of the selective buyback – which was only offered to Shell – meant other investors did not have the opportunity to participate in the plan. Some 28% voted against the deal as they felt all shareholders should be treated equally. However, Woodside said that Shell would not accept an open buyback.

The Woodside board’s defeat is a setback for Shell, which is disposing of non-core assets. The end result is that Shell still has a 13.6% stake in Woodside – not as sizeable as the 23.1% it held earlier, but far from ideal. In June the company sold a 9.5% stake to institutions.

The selective buyback, had it gone ahead, would have cut its stake to below 5%. Another placement by the supermajor might be necessary as Shell is still seeking to sell $8bn of assets this year.

Woodside’s board says the Shell minority stake is weighing on its stock price as investors know the oil major is planning an exit. Aside from the overhang on Woodside’s share price, Shell is also a major competitor. Woodside without Shell would be a far more interesting company, and one with a lot to prove as it stands alone and is forced to chase growth without a strict Anglo-Dutch supermajor looking over its shoulder. 

Shell became Woodside's top shareholder in the wake of its failed bid to take over the Australian company in 2001. The takeover was blocked by the Australian government following an aggressive lobbying campaign by Woodside, which argued that Shell might focus on offshore developments at the expense of Australian projects. 

Both companies have been negotiating how Shell could best divest its interest in Woodside for almost a decade. 

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