Shell Eyeing Valero?

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Shell Eyeing Valero?

10/26/2011

UNITED KINGDOM -- Rumors were doing the rounds recently that Royal Dutch Shell could get involved in a possible bidding war for Texas-based Valero Energy, which owns and operates 15 refineries worldwide, according to a report this morning by the U.K. Daily Mail.

According to the report, speculation is rife that cash-rich Indian refiner and explorer Reliance Industries, which is owned by billionaire Mukesh Ambani, is poised to spend some of its £7.9billion cash pile by launching a $48 per share cash offer for Valero whose shares were trading sharply lower at $21.30 early on Wall Street amid talk of trouble at one of its U.S. refineries.

The report notes that Reliance, which has a market capitalization of £45 billion-plus, needs to diversify beyond India, where growth prospects are limited. The group received £4.5bn from the sale of a 30 per cent stake in 21 oil and gas fields to BP, and Ambani has been looking for a major acquisition to take advantage of the low oil and gas valuations of the past few years.

The Mail says Citibank and JP Morgan are believed to be advising on a big deal in the energy sector which could break any day soon. Should Valero come under attack from Reliance, analysts do not rule out the possibility of not only Royal Dutch Shell but China's CNOOC getting involved in the bidding, according to the report.

Investors are clearly confident Valero could soon be sold.

Valero, trading under the New York Stock Exchange symbol VLO, saw its shares rise more than 15 percent today.