Woodside Purchase May Be `Plan B' for BHP, Morgan Stanley Says

BHP Billiton Ltd., the world’s largest mining company, may seek to acquire oil and gas producer Woodside Petroleum Ltd. if its $40 billion bid for Potash Corp. of Saskatchewan Inc. fails, Morgan Stanley said.

A Woodside bid would be a “plausible plan B” for BHP, according to Morgan Stanley analysts Craig Campbell and Stuart Baker. One of Woodside’s partners in the North West Shelf gas project, including Melbourne-based BHP, may buy Royal Dutch Shell Plc’s remaining stake in Australia’s second-largest oil and gas producer, they wrote in a report dated yesterday.

Shell this week sold a 10 percent holding in Woodside for about $3.3 billion. Europe’s largest oil company may eventually sell its remaining 24.27 percent stake as it concentrates on developing liquefied natural gas projects, analysts have said.

“The path to a successful takeover of Woodside is now less challenging for either BHP or another suitor,” the Melbourne- based Morgan Stanley analysts said. BHP is “acquisitive and cashed up” and would be unlikely to confront opposition from Australia’s Foreign Investment Review Board, they wrote.

The Canadian government on Nov. 3 rejected BHP’s offer for Potash, saying the proposal doesn’t provide a “net benefit” to the country. BHP has 30 days from the ruling to appeal.

“Should BHP fail to change the view of the Canadian government in the next 30 days on Potash Corp., we expect the market to focus on BHP potentially acquiring Woodside,” the Morgan Stanley analysts said in the report.

‘Not Convinced’

Macquarie Group Ltd. said in a report yesterday that it “simply is not convinced BHP is a buyer” of Woodside. “Despite the growing media hype that Woodside is now in play, we instead see this share sale as a strong suggestion that an industry buyer could not be found,” according to the note.

Woodside also doesn’t have the oil development assets that BHP apparently wants, Macquarie said.

Woodside rose 1.6 percent to A$42.88 at 10:53 a.m. in Sydney trading, valuing the Perth-based company at almost A$34 billion. BHP rose 0.7 percent to A$44.44, compared with a gain of 0.5 percent for the benchmark S&P/ASX 200 Index.

A possible Woodside purchase would give BHP more LNG production in Australia, expected to become one of the world’s largest suppliers of the fuel, and increase its earnings, the Morgan Stanley analysts said. BHP is Australia’s largest oil and gas producer.

‘Drawn Out’

Shell said Nov. 8 it would keep its remaining Woodside holding for at least one year, “with limited exceptions,” including a potential takeover offer by another company for Woodside.

Buying the rest of Shell’s stake “could be a drawn out process,” the Morgan Stanley analysts said.

BHP spokeswoman Amanda Buckley, and Roger Martin, a spokesman for Woodside, this week declined to comment on speculation of a bid.

BHP would be better off pursuing smaller targets, such as Tampa, Florida-based steel-making coal producer Walter Energy Inc., the Wall Street Journal said in its column The Source.