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June 24, 2017

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Woodside shareholders reject Shell's stock plan

SYDNEY--Woodside Petroleum shareholders rejected Friday a US$2.7 billion stock buyback from Royal Dutch Shell following objections by large institutions wary of preferential treatment of the oil giant.

The Australian company was unable to reach the 75 percent threshold needed for the resolution to pass, which would have allowed it to buy 9.5 percent of its share capital from Shell, the firm said in a statement.

Following a vote at an extraordinary general meeting, Woodside said 72 percent were in favor of the plan with 28 percent opposed.

Shell announced last month it wanted to reduce its stake to focus its Australian growth in directly owned assets.

Shares in Woodside, which operates six of Australia's seven LNG processing plants, were 1.95 percent lower at US$41.69 following the announcement.

Woodside chairman Michael Chaney said ahead of the meeting that his board "fully respects the likely outcome of the vote."

But he added the Shell buyback was the "only option" that could have helped the Anglo-Dutch firm to reduce its holdings efficiently.

"An equal access off-market buyback would involve less certainty regarding the price and quantum of the buyback depending on shareholder participation and would not provide an orderly reduction of Shell's shareholding in Woodside," Chaney said.

Expectations that the buyback would fail rose after the Australian energy company announced Thursday that only 71.3 percent of eligible proxy and direct votes were supportive of the proposal.

Institutional shareholders such as superannuation funds, which invest Australians' retirement contributions, said their decision to block the plan was based on a desire for equal treatment for all parties.

"We don't see the point in there being preferential treatment for other shareholders on specific deals," Local Government Super's Bill Hartnett told the Australian Financial Review.

"We want the board to consider long-term shareholders in the decision, who are going to be there afterwards as well."

Shell launched a full takeover of Woodside in 2001 as part of a move to get ahead of its rivals in its efforts to meet the demand for clean-burning fuels, but it was blocked by the government on the grounds of national interest.

Since then, Shell has flagged a desire to sell, which analysts said had reduced the incentive for other institutional investors to buy into Woodside due to the uncertainty.

The Shell buyback would have seen the firm reduce its stake in Woodside to below 5.0 percent.

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