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"Nope" says Commerce Commission to Shell

By Ben Dutton

Thursday 12th October 2000

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Dealing a massive blow to Fletcher Challenge's restructuring process, the Commerce Commission has declined to clear the Shell acquisition of Fletcher Energy.

Commission Chair John Belgrave said that the Commission was concerned about Shell acquiring or strengthening dominance in all three of the relevant markets.

These "relevant" markets are current gas production, gas production after 2009, and the production of liquefied petroleum gas (LPG).

"In summary, the Commission is not satisfied that Shell would not acquire or strengthen dominance in the three relevant markets, and we cannot give a clearance," Mr Belgrave said.

Replying to the Commission's announcement, Fletcher Challenge CEO Michael Andrews said "until the Commission's full decision is released next week and we understand details of its concerns and Shell's response, we are unable to make any further comment."

Investors in Australia, where Fletcher Energy trades under the symbol FLCES certainly made a comment after hearing the news - Energy was slammed down to AUD$5.68.1 - a massive drop of almost 20%.

Many analysts thought that by announcing its restructuring plans before the Commerce Commission released its findings, Fletcher Challenge was confident clearance for the Energy acquisition would be given.

Now the conglomerate's plans have been thrown into disarray. Chairman of Fletcher Challenge, Dr Roderick Deane, has talked of a second option should Shell not be allowed to acquire Energy - exactly what this option is though, investors will have to wait and see.

One thing is for sure following this decision by the Commerce Commission - the road to riches for Energy shareholders will not be travelled down quite as easily as many first thought.

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